Looking Good--on Paper

Can’t think of a Father’s Day gift? Not sure if the graduate on your list wants a calculator or a Gameboy? Invited to a wedding for a friend of a friend? Consumers are increasingly turning to gift certificates to avoid the pitfalls of modern day gift-giving.

With the gift-certificate business growing about 15% each year, consumers are sometimes left wrestling with the little-known laws governing the certificates.

Although the certificates are similar to money, recipients often don’t treat them that way, experts said. Many are tucked away in dresser drawers and forgotten for years at a time. Sometimes, people assume old certificates can no longer be used.

In California, however, most gift certificates are good indefinitely. The state recently banned expiration dates on most types of gift certificates.

If you lose a gift certificate, a retailer has to replace it with a new one at no cost if you can provide a proof of purchase, according to state officials. Only certificates used for promotional giveaways or for food items may expire, they said.

From there, the law gets more complex.

If you buy a $100 gift certificate for your mother and she makes a $50 purchase with it, the retailer is not required to give the remainder back in cash. Jay Van Rein, a spokesperson for California’s Office of Consumer Affairs, said state law is vague on this point, and consumers are at the mercy of store policy.

“I’m surprised the Legislature hasn’t done much about it, since this is something that pretty much everyone deals with,” Van Rein said. “It needs to be clarified.”

The law is even less clear on increasingly popular gift cards, which resemble credit cards but behave like gift certificates. Many stores prefer them because, unlike paper certificates, the cards are indestructible and replaceable and can be loaded with more credit once the gift runs out.

Yet unlike gift certificates, some gift cards have hidden costs, like fees for failing to use the full balance within a set period of time, according to Gail Hillebrand, senior attorney with the advocacy group Consumers Union.

“It’s something to ask about when you’re buying gift certificates. Maybe you should choose to go somewhere else. And if you’re thinking about using one, use it promptly,” Hillebrand said.

Until legislation or case law clarifies how retailers handle gift cards and gift certificates, disputes will probably end up in Small Claims Court, said Van Rein from the Office of Consumer Affairs.

“Until more gift-certificate cases end up in the hands of the legal profession, we’re probably not going to have a clear answer on what the law means,” Van Rein said.

Some legal battles on the subject are already underway.

According to one civil lawsuit filed this March in Orange County Superior Court, some major retailers are still putting expiration dates on certificates.

Neil Fineman, a Santa Ana attorney, represents eight clients in the suit. “Pretty much the bottom line is that I’ve given a store money, and I am making a gift, and the recipient should have the right to go back into the store and get what I paid for it,” said Fineman, who concentrates on consumer lawsuits.

Despite this problem, Fineman said most retailers do obey the law.

Between 5% and 8% of gift certificates are never redeemed, according to Dan Horne, a business professor at Providence University in Rhode Island. Before 1997, money from these unclaimed certificates went to the state’s general fund after three years. The state was in charge of redeeming them if they were claimed.

The law was changed in 1997 to say that consumers can redeem certificates indefinitely. But cash for unclaimed ones now stays with the retailer.

Because companies frequently merge and change names, redeeming old gift certificates could become more complicated, according to Daniel Epstein, a consultant for ACS Unclaimed Property Clearinghouse, a Boston firm that helps states return unclaimed property to owners. “Unlike businesses, the state never goes bankrupt,” he said. “There’s never a merger of one state with another where all records are destroyed.”

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Facts and Fallacies About Gift Certificates

Myth: Gift certificates have expiration dates and can’t be used after a year or two.

Fact: Under state law, almost all certificates purchased by consumers are good indefinitely. Only certificates used for promotional giveaways or for food items may expire.

Myth: Gift certificates are the same a s cash.

Fact: Not necessarily. If you use a portion of a gift certificate, a retailer is not required to give the remainder back in cash. Some retailers only allow certificates to be redeemed with merchandise.

Myth: “Gift cards” now offered by some retailers are the same as gift certificates.

Fact: Not always. Some have more complex terms and conditions. Read the fine print carefully.

Source: Times reports

Researched by WILLOUGHBY MARIANO/Los Angeles Times