Legislature(2007 - 2008)BELTZ 211
03/20/2007 09:00 AM STATE AFFAIRS
Download Mp3. <- Right click and save file as
|Confirmation Hearing: Talis Colberg, Lieutenant Governor Designee|
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
SB 115-GIFT CARDS 9:29:38 AM CHAIR MCGUIRE announced the consideration of SB 115. MARIT CARLSON VAN DORT, Staff to Senator Lesil McGuire, said SB 115 is the response to a dramatic increase in consumer demand for convenient gift options and consumer frustration with hidden fees and restrictions. Several states have addressed the issue by limiting expiration dates and fees. The bill includes electronic gift cards, similar to debit cards, as well as the more traditional gift certificates issued by businesses. SB 115 will ensure that gift cards will retain their full value in perpetuity and will not be subject to expiration dates, dormancy fees, service fees or anything that will reduce their total redemption value. Exclusions include awards or promotion programs; donations; bank-issued gift cards; or cards that can be used at multiple locations. Cards that remain unclaimed by the owner for more than three years are presumed abandoned and will be subject to reporting to the state as unclaimed property. 9:31:49 AM SENATOR BUNDE asked about the business perspective. He spoke of a certificate for a discount of any purchase over $50, but it had a time limit. CHAIR MCGUIRE said awards and promotions are specifically exempted. The bill refers to gift cards, and she gave an example of giving someone a gift card from Borders Books, and the receiver would not have to rush out and use the gift card at the risk of losing the value of the card. The consumer complaint is that some gift cards lose value over time, "so the three years seems to be kind of a reasonable time period." SENATOR STEVENS asked for statistics on unclaimed gifts because he heard there are enormous amounts of money that merchants get the benefit of. It is a great benefit to the merchant to sell a gift card that no one ever uses, he surmised. 9:34:33 AM RACHEL LEWIS, Administrator, Unclaimed Property, Department of Revenue, said nationally $58 billion worth of gift cards were sold last year, and it is estimated that $8 billion will not be redeemed. Some businesses are reporting that as unclaimed property and some roll it into income. This bill will identify that that money belongs to the consumers who purchased those cards. It is continuing to grow every year, she stated. SENATOR BUNDE asked for Alaska statistics. MS. LEWIS said about $58,000 have been reported to the state. Use of gift cards is pretty new in the last five years, but it is snowballing. She noted that a lot of companies in Alaska are setting up their books to monitor gift cards. Alaskans use a lot of gift cards, she added. 9:36:24 AM SENATOR BUNDE asked if the $58,000 was unclaimed. MS. LEWIS said that is what has been turned over to the state. SENATOR STEVENS asked what happens to the property and if the state can use a Barnes and Noble gift card, for example. 9:36:57 AM MS. LEWIS said since 1986 Alaska has had about $88 million worth of unclaimed property, including payroll checks, insurance reimbursements, old bank accounts, stocks, mutual funds, dividends and re-investment plans. About $23 million has been returned to the owners. What is not claimed is put in the general fund and used for all Alaskans, adding up to about $58 million since 1986. The state is usually transferring $3 million to $9 million each year as companies update their books. SENATOR STEVENS asked about the process for a gift certificate that a person doesn't claim. MS. LEWIS said every year companies review their books for any outstanding liability. After the three-year dormancy period they would file an unclaimed property report with the state if the last known address of the recipient is in the state, otherwise it will go the state where the business is incorporated. 9:39:10 AM SENATOR FRENCH said Section 4 makes a card valuable in perpetuity, but after three years an unclaimed card is presumed abandoned. MS. LEWIS explained that the card is good in perpetuity with the state. The business removes it from its liability account after three years, but the card is still good if it has been reported to the state, "and you can claim your money through the State of Alaska unclaimed property office." SENATOR FRENCH said his family forgets to use them. He asked what happens if a merchant tells him his card is expired. "How would I then know that I can get my money back from the state? Would they have to tell me?" He asked, "If they won't honor it, how do I figure out that it's actually good in perpetuity?" 9:40:57 AM MS. LEWIS said some details will be on the card. A business will need to honor the card or refer you to whatever state it has turned the money over to. CHAIR MCGUIRE said a lot of consumers have complained about this. Alaska has many folks who buy gift cards, which may be geographical or because Alaskans are lazy. People become disappointed when the gift card loses value. A gift card is money into the businesses coffers just like buying a jacket. "What you're seeing companies do is, kind of, come back and double dip." This is a consumer protection bill, and it is not unfair to a business. The business has received the benefit of that purchase, she stated. 9:43:12 AM HEATH HILYARD, Staff to Representative Carl Gatto, Alaska State Legislature, said the original version had an expiration period of seven years, which is what Massachusetts does, and then it was changed to "in perpetuity" to maximize consumer protection. The gift card will forever hold its value. After three years it is considered abandoned but it is up to the retailer on how to handle it. Representative Ramras said the gift cards for his business always retain their value, so as a business owner he has no problem. Once it is reported as unclaimed, then the business can honor it and report that back to the state, or the business can send the customer to the unclaimed property division to recover the value of the card. 9:45:37 AM MR. HILYARD spoke of the lingering balance on a business's books. Many retailers do continue to value the gift cards. The intent was to get at the "open universe cards" that are now specifically exempted. These cards open a temporary bank account, like at Key Bank or Wells Fargo, for example, but those are regulated by federal laws, so the bill cannot regulate the main offenders that the sponsor really wanted to address. But in his investigations he found that there are larger retailers in the state that "still are kind of abusive." CHAIR MCGUIRE said the committee can set the termination point anywhere, including seven years or in perpetuity. Most states are dealing with this somehow, she said. The goal was to think about the maximum value to the consumer with respect to the limitations of federal laws. 9:47:53 AM SENATOR FRENCH said the bill says the card is valuable forever, but when the consumer tries to use an abandoned card, the consumer may be set up to be disappointed. 9:48:49 AM MR. HILYARD said, "If you made the expiration period the same as the unclaimed property, then that would negate the need for unclaimed property in these devices." CHAIR MCGUIRE discussed four options: making the deadline commensurate with the unclaimed property statute-three years; eliminating it so it would be the same; using the Massachusetts model of seven years; or having it retain value in perpetuity. She agreed it might cause consumer confusion. SENATOR BUNDE said when he buys a jacket he is not charged an activation fee and he is not charged if he doesn't use his jacket. "So there is some double dipping in there." He endorses that aspect, but questions the practicality. He asked how much paperwork is generated for a person requesting the remaining value on a gift card. He asked if the state can use that money prior to a person reclaiming it. "Does your division make money or does it cost money" he asked. 9:51:05 AM MS. LEWIS said processing claims is automated, and gift cards are a very small portion of them. There is an online system, "so I do not think it would cost the state very much money." CHAIR MCGUIRE said she thinks the state is making money: "$58 million since 1986?" SENATOR BUNDE asked if any companies have complained about the proposed legislation, particularly the double dippers. CHAIR MCGUIRE said no one has. Merchants can choose to sell gift cards if it generates income. She suggested making the terms clear. She thinks merchants will choose to keep the gift card system because of its popularity. "And I still think they'll get the benefit of having those customers come in." SENATOR BUNDE said the business gets the money upfront and can make use of the money. He surmised that businesses expect that a certain percentage of cards will never be redeemed. CHAIR MCGUIRE said it is a clever business, but it is also convenient for the lazy shoppers. 9:53:39 AM SENATOR GREEN said she bought gift cards for the kids and paid an upfront fee. She asked if that would be addressed. CHAIR MCGUIRE said that would not be allowed. SENATOR GREEN asked about removing the term "certificate" from the bill and if it is addressed somewhere else. MS. VAN DORT said it was intended to be removed, and she thought it was defined somewhere. She read: and gift certificates are included under the definition of gift cards. CHAIR MCGUIRE noted page 3, lines 29-31, where it said a device that is usable up to its face amount. "So we're changing the definition and including it, so it's all encompassing." 9:55:17 AM SENATOR GREEN said it is confusing. MR. HILYARD said, "Our version opted for 'gift card' and…we went for a more generic term that broadly includes gift certificate as it currently exists, but now we also include gift card, because it is a specific type of device." SENATOR FRENCH said he shares Senator Green's concern. A gift card is plastic and certificates are paper. He questioned if a consumer would realize they are both under the same rules. The title mentions both, and it would be clearer if both were referred to throughout the bill. 9:56:53 AM CHAIR MCGUIRE said she will ask the drafter about it. A consumer likely sees the distinction between a certificate and a card, she surmised. She said she would hold SB 115 over until Thursday.