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The Honolulu Advertiser
Posted on: Monday, March 22, 2004

Bill would extend life of gift cards to minimum 7 years

By Lynda Arakawa
Advertiser Capitol Bureau

Kunia resident Chrisanta Mullins recently found a gift card that someone had given to her more than two years before. But to her disappointment, she discovered it had expired.

"I'm like, 'Aw, man, I can't use it anymore,' " she said.

Mullins, a 22-year-old production coordinator, gave a thumbs-up to a bill being considered in the Legislature that would require restaurants and retailers to honor gift certificates for at least seven years, up from the present two-year minimum.

Mullins said she would try to redeem her expired gift card anyway because she knows of other businesses that have honored expired ones. But requiring all businesses to make gift certificates and gift cards valid longer is a good idea, she said.

"A lot of people get gift cards, and here in Hawai'i you get so busy in your everyday life and you put it away and put it on the side," she said. "And not everybody cleans their house thoroughly to where they find every piece of mail or every little birthday present they were given and they may not use it right away. When they come across it a long time later and it's expired it's like, oh, well, there goes what was given to you."

House Bill 2143, which passed the state House, would also prohibit dormancy, or inactivity fees, that are sometimes charged on gift cards if they're not used for a while. Under the bill the fees would not be allowed for seven years.

The measure also gives consumers who use at least 90 percent of the gift certificate's value the right to receive the balance in cash.

The Senate Commerce, Consumer Protection and Housing committee will hear the bill at 9 a.m. today in State Capitol Room 16.

Tom Jones, co-owner of Gyotaku Japanese Restaurant, called the bill an example of government trying to control the marketplace. He said businesses should be able to set its own terms as long as the customer knows what they are when they buy a product. He also said keeping unredeemed certificates on the books is costly.

"Responsible companies keep track of what they sell and how much is redeemed and what the balance is, and that requires labor and accounting and all of that," he said.

But having said that, Jones also said he accepts expired gift certificates, even those bought under the restaurant's previous owner.

"We have found it to be to our advantage to accept gift certificates beyond the expiration date because of the good will that it produces," he said. "The last thing a restaurateur wants to do is make somebody angry and not want to come back to their restaurant."

Foodland spokeswoman Cheryl Toda did not state a position on the bill but said Foodland honors all gift certificates, even if they are expired, to take care of customers.

House Consumer Protection and Commerce Committee Chairman Ken Hiraki, D-28th (Iwilei, Downtown, Makiki), who inserted the gift-certificate provisions into the House bill, said the legislation is based on a Massachusetts law.

He said he has heard complaints from some consumers about gift-card and gift-certificate restrictions and that "we threw it out there for discussion."

Some people interviewed in downtown Honolulu last week, including legal secretary Roberta Bishaw, thought the bill was a good idea.

Bishaw, a 47-year-old Kailua resident, said she has unsuccessfully tried to redeem expired gift certificates.

"I think (the bill) is great because I always forget about gift cards, and when I remember it's usually expired," she said. "I think the only problem with this is if the company changed hands, then it could be difficult for them to honor it. But other than that, I think for established department stores, they should extend it. I think it's a great bill."

Galen Lee, 42-year-old vice president of finance at Schuler Homes, also gave a nod to the idea.

"The person paid for it, so to me it's like cash — cash doesn't expire," Lee said. "It does put a burden on the business, but I think that's part of the cost of doing business. If you want the customer, you have to be a little more user friendly."

But Honolulu attorney Paul Kawai, 32, saw the issue from both sides.

"I guess on the one hand it would help consumers because a lot of people don't use their gift certificates immediately — they store them away," he said. "But on the other hand it might discourage some sellers of gift certificates from issuing those gift certificates to people. ... It's also a matter of can this law be enforced."

Stephen Levins, acting executive director of the state Office of Consumer Protection, said he receives few complaints from consumers about problems with gift certificates and gift cards. He estimated receiving fewer than five complaints about gift certificates in the past year.

Carol Pregill, president of the Retail Merchants of Hawai'i, said the bill is unnecessary and particularly burdensome for small businesses, who would have to carry unredeemed certificates on their books as a liability for years. She said many retailers who set expiration dates on gift certificates have honored expired certificates as a practice of good customer service, and that Mainland research shows 96 percent of all gift certificates are redeemed within two years.

"The expiration date encourages people to use them in a timely basis, and for small companies, that's important," she said. "A gift certificate is not a sale until it's used. So it becomes almost like an escrow account."

Opponents have also defended dormancy fees on gift cards, saying some businesses' gift cards are administered by a third party, which charges such fees.

Pregill said businesses here that have charged dormancy fees no longer do so because of a recent opinion from the state attorney general's office. The opinion said while the law does not explicitly address gift-card fees, it can be interpreted as prohibiting them.

In any case, businesses are not supposed to profit from unclaimed gift certificates. State law mandates businesses to report gift certificates that have not been redeemed for five years as unclaimed property and turn that money over to the state. Owners of the gift certificates can then file a claim with the state to recover its value. The House bill would allow businesses to keep the proceeds from unredeemed certificates.

An official from the state Budget and Finance Department, which manages the unclaimed property program, said businesses have transferred about $13,000 to the state for unclaimed gift certificates in 2003, and that it's assumed many other businesses do not comply.

Reach Lynda Arakawa at larakawa@honoluluadvertiser.com or 525-8070.