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**FOR IMMEDIATE RELEASE**
November 23, 2007
Contact: Sarah Krauss
(212) 669-4193; (917) 541-0936
Release #: 066-2007
Gotbaum: Fine Print Allows Retailers to Make Estimated $300 Million off Gift Cards Sold to New Yorkers
MANHATTAN - Loopholes in State law continue to allow retailers to rake in hundreds of millions of dollars in profit for unredeemed gift cards purchased by New Yorkers, according to Public Advocate Betsy Gotbaum. In 2004, an estimated $300 million went back into the pockets of retailers and millions more were lost on fees charged for inactive cards. Gotbaum today reiterated calls for a tightening of State law.
Under New York State law, the value on cards inactive for five years must be turned over to the New York State Comptroller's Office of Unclaimed Funds, which keeps the money in trusts for owners to claim at any later point. It is estimated that $5.28 billion went unclaimed and will likely wind up back in the pockets of retailers - not the pockets of New Yorkers.
Public Advocate Gotbaum said, "Gift cards are probably one of the best retail scams going. It's a marketing tool worth billions. Companies squeeze every last penny out of cardholders and avoiding reporting unclaimed property to the state. But it comes at the expense of consumers. It should be a win-win situation for both retailer and consumer. Consumers need better protections."
Retailers skirt State law through a series of loopholes: (1) they incorporate in states that do not require the return of unclaimed gift card funds; (2) they do not collect any personal information from the purchaser, thus avoiding turning over the balance on cards to the purchaser or the state where s/he resides. By taking advantage of these loopholes, companies have been able to maximize profit from these cards.
New York State law already prevents charging a monthly fee until the 13th month and mandates that sellers give consumers information about the terms and conditions of gift certificates at time of purchase.
Groups such as the Consumer Union and the U.S. Public Interest Research Group have criticized retailers for taking advantage of consumers who provide them with immediate cash flow in return for a delayed service or product.
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