Legislature(2007 - 2008)BELTZ 211

03/20/2007 09:00 AM STATE AFFAIRS

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09:01:17 AM Start
09:03:29 AM Confirmation Hearing: Talis Colberg, Lieutenant Governor Designee
09:11:50 AM SB92
09:29:38 AM SB115
09:58:34 AM HCR3
10:05:52 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Confirmation Hearing: TELECONFERENCED
Lieutenant Governor Designee -
Talis Colberg
Heard & Held
Heard & Held
Moved HCR 3 Out of Committee
                       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                                                               
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                                                               

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