Barton, Bass Urge FTC to Review Gift Card Sales

Deceptive Practices of a Growing Industry Draw Consumer Ire

WASHINGTON - With Christmas shopping at a fever pitch, two senior members of the House Energy and Commerce Committee today asked the Federal Trade Commission to examine the burgeoning gift card industry and the questionable practices of some retailers.

Committee Chairman Joe Barton, R-Texas, and U.S. Rep. Charlie Bass, R-N.H., have written to FTC Commissioner Deborah Platt Majoras and requested that the agency look into how gift cards are marketed, sold and used and to report back to the committee by Feb. 17, 2006.

"We are concerned that consumers will be confused by the different rules that retailers have for their cards, and that some have been and will be deceived about the cards' restrictions," the lawmakers wrote.

Chief among the concerns are expiration dates, dormancy fees and maintenance costs that can reduce or altogether eliminate the value of the cards. Some major companies do little or nothing to inform consumers about these restrictions. The National Retail Federation expects gift card sales will reach approximately $18.5 billion this year.

The full text of the letter follows:

December 20, 2005

The Honorable Deborah Platt Majoras
Chairman
Federal Trade Commission
600 Pennsylvania Avenue, NW
Washington, DC 20001

Dear Chairman Majoras:

The Committee on Energy and Commerce has an obligation to help protect American consumers from unfair and deceptive trade practices. We are grateful for the Federal Trade Commission's commitment to this same goal, and appreciate the Commission's continuing assistance to the Committee in this area.

During the holiday season many Americans choose one of the easiest and most convenient ways to shop for their friends and loved ones, buying gift cards for some on their holiday list. According to the National Retail Federation, sales of gift cards have been growing in recent years, with projected sales reaching approximately $18.5 billion this year. Some have even estimated that gift cards will account for more than 15% of total holiday shopping.

With gift cards becoming more prevalent, we are concerned that consumers are not being given all the appropriate information about their use. It has come to our attention that some retailers' gift cards are very different from others, and there are often restrictions on how the cards can be used. Gift cards often have expiration dates, dormancy fees, and maintenance costs that can reduce or even eliminate the value of the card if the recipient does not know how to spend it wisely. Furthermore, many retailers do not disclose these restrictions. Moreover, recent reports state that gift cards sold by Blockbuster, KB Toys, Kmart, Red Lobster, and Toys R Us have expiration dates, but the entities do not disclose this limitation. Other stores deduct or eliminate the value of their cards if it is not used in a certain time period.

While some states have passed laws that regulate gift cards, there are no national rules dealing with how gift cards should work. We are concerned that consumers will be confused by the different rules that retailers have for their cards, and that some have been and will be deceived about the cards' restrictions. Accordingly, we ask that the Commission look into how gift cards are marketed, sold, and used, and to report back on its findings in a letter to the Committee by February 17, 2006.

Thank you for your assistance, and for your continued commitment to protecting American consumers.

Sincerely,

Joe Barton
Chairman
Committee on Energy and Commerce

Charles Bass
 Member of Congress

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