Holiday Shoppers Beware

With holiday shopping season well underway, our mailboxes and inboxes are open to a full barrage of advertisements from department stores, chain stores, and all types of retailers. Shopping season can be both fun and stressful, but there are certain things consumers must look out for when shopping this season. Two main areas of concern are gift cards and restocking fees.
Gift cards are convenient for both the purchaser and the recipient, but depending on their issuer they may diminish in value if not used by a certain period. Consumers should be on the lookout for expiration dates on cards as well as policies establishing a charge for each month the card goes unused. There are currently loopholes in New York State law which allow for the retailers to profit on these unredeemed cards.
The money you spent on the card ends up going right back into their coffers because retailers are able to apply dormancy fees after twelve months. In some cases, you may be charged $2 a month for not using your card.
Last year alone, an estimated $300 million in unredeemed gift card money went back into the pockets of retailers, and millions more were lost on monthly fees charged for unused cards.
While oftentimes it is the responsibility of the retailer to inform gift card purchasers of the expiration dates or of monthly fees, but that does not always happen. If retailers do not have a purchaser's contact information, they are supposed to turn over the unredeemed value of his or her card to the New York State Comptroller's Office of Unclaimed Funds, which keeps the money until it is claimed.
But this is not always the case as you might expect because retailers have found ways around these legal requirements. In fact, there is a retailers association guide that actually instructs retailers on how they can violate the spirit of the law and keep the unredeemed balance. One section of the guide called &#8220How to Avoid Reporting Unredeemed Gift Cards,” teaches retailers to avoid taking the purchaser's personal information. Another explains how to use expiration dates and dormancy fees to capitalize on unredeemed gift cards. The guide also instructs retailers to incorporate in states that do not require the reporting of unclaimed gift cards.
I advise consumers to do the following before purchasing gift cards: 1) understand the terms and conditions for use of the card; 2) determine whether the card has an expiration date; 3) ask about any upfront fees for the card; 3) find out if the retailer charges any dormancy fees for inactivity; 4) request the retailer's replacement policy, in case the card is either lost or stolen.
Restocking fees are another way in which retailers are able to profit with the consumer getting nothing in return. They are very common with furniture stores and cellular phone retailers. A return of a purchase of $200 at one of these stores could easily result in a $50 dollar fee. My office conducted a study this year which looked at over 160 stores across the city and found that 44% of the stores charge restocking fees and that 27% of those stores do not conspicuously post these fees. Not informing customers that they might be hit with such a large fine is less than honest.