FTC Chief Calls for Disclosures on Gift Cards

By Caroline E. Mayer
Washington Post Staff Writer
Saturday, February 18, 2006

Gift card issuers that do not clearly and conspicuously disclose fees or expiration dates may be engaged in deceptive marketing, the chairman of the Federal Trade Commission has told Congress.

Deborah Platt Majoras said there may be valid reasons for expiration dates or fees, but "consumers are entitled to know all material terms." Failure to disclose them adequately "would be likely to mislead consumers," Majoras said in a letter she sent to Rep. Charles F. Bass (R-N.H.) this week. The Washington Post obtained the letter yesterday.

Bass and Rep. Joe Barton (R-Tex.,) chairman of the House Energy and Commerce Committee, asked the FTC in December to look into the marketing, sale and use of gift cards after noting an increase in gift-card complaints.

Bass said yesterday that he would request a hearing to determine if there should be uniform guidelines for all issuers. "I believe we can do more," Bass said. Existing consumer protection laws may not be sufficient for gift cards since the person who buys the card is not the one who ends up using it, he has said.

The FTC's authority to regulate gift card disclosure and marketing may be limited since it does not regulate banks, which account for a growing share of the gift-card market, issuing Visa, MasterCard, American Express or Discover gift cards.

Credit card companies regulated by banking authorities and follow electronic-funds-transfer rules written by the Federal Reserve Board. Those rules may not cover gift cards, federal officials said yesterday.

Credit card company and retail officials would not comment yesterday on the FTC letter because they had not seen it. They said they already disclose key terms and conditions in material that comes with the cards and on their Web sites.

Elizabeth T. Oesterle, government relations counsel for the National Retail Federation, said many retailers are getting rid of fees and expiration dates.

With the decline of paper gift certificates, plastic gift cards have become a big and rapidly growing business, exceeding $110 billion in sales last year. Most of the cards are sold by retailers for use only at an issuer's stores. But bank cards, which can be used almost everywhere, have been gaining in popularity.

Some consumers have complained that they have had difficulties using bank cards to make purchases for more than the card's value, a problem that some credit card issuers are trying to correct with updated technology.

In her letter, Majoras referred to a survey of 30 retail gift cards by the Montgomery County Division of Consumer Affairs that found nine with expiration dates or potential fees. Six failed to disclose that information before purchase in stores, on their Web sites or both, the study found.

"The existence of an expiration date or potential fee on a gift card is likely to be material information because such conditions would likely affect a consumer's decision whether to buy or use a particular gift card," Majoras wrote.

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