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F I S C A L I M P A C T R E P O R T

SPONSOR HJC

ORIGINAL DATE

LAST UPDATED

2/14/2007

HB 127/HJCS

SHORT TITLE Gift Certificate Sale and Redemption Regulation

SB

ANALYST Schuss

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

NFI

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

SUMMARY

Synopsis of Bill

The House Judiciary Committee substitute for House Bill 127 regulates the sale and redemption

of gift certificates, establishes penalties and amends a section of the unclaimed property act. Gift

certificate, in this section, means writing identified as a gift certificate that is not redeemable in

cash and is usable in its face amount in lieu of cash in exchange for goods or services supplied

by a seller, but does not include a gift certificate useable with multiple unaffiliated sellers or

goods or services. “Gift certificate" includes an electronic card with a banked dollar value, a

merchandise credit, a certificate where the issuer has received payment for the full face value for

the future purchase or delivery of goods or services and any other medium that evidences the

giving of consideration in exchange for the right to redeem the certificate, electronic card or

other medium for goods or services of at least an equal value.

FISCAL IMPLICATIONS

The Attorney General’s Office states that the bill requires the Attorney General to investigate

and prosecute all violations of this act, but provides no appropriation for additional staff, which

may impact the agency’s other performance based budget targets

House Bill 127/ HJCS – Page

2

SIGNIFICANT ISSUES

House Bill 127 restricts an issuer of a gift certificate to a minimum expiration period of 60

months after the date the gift certificate was issued. The bill states that the expiration date must

be conspicuously placed on the gift certificate or it is presumed to have no expiration period. The

bill prohibits the issuer from charging fees of any kind in relation to the sale, redemption or re-

placement of the gift certificate other than an initial charge not to exceed the face value of the

gift certificate. The gift certificate may not be reduced in value by any fee, including a service or

dormancy fee.

A violation of this section will constitute an unfair or deceptive trade practice and shall be sub-

ject to the penalties set forth in the Unfair Trade Practices

HB 127 states that “gift certificate" does not include the following:

•

gift certificates, store gift cards or general use prepaid cards distributed to a

consumer for promotional, award, incentive, rebate or other similar purposes without

money or something of value being given by the consumer in exchange for the certificate

or card

•

gift certificates, store gift cards or general use prepaid cards that are sold below face

value or at a volume discount to employers or to nonprofit and charitable organizations

for fund-raising purposes

•

written promises, plastic cards or other electronic devices that are used solely for tele-

phone services; or are associated with a banking institution for debiting purposes

•

gift certificates issued by banks, savings and loan associations, licensed money transmit-

ters or credit unions operating pursuant to the laws of the United states or New Mexico

HB 127 amends Section 7-8A-2 NMSA 1978 (Presumptions of Abandonment) to state that a gift

certificate is presumed abandoned five years after December 31 of the year in which the certifi-

cate was sold, but if redeemable in merchandise only, the amount abandoned is deemed to be

sixty percent of the certificate's face value.

OTHER SUBSTANTIVE ISSUES

The Attorney General’s Office offers the following background information:

According to UnclaimedAssets.com in 2005 from 3 to 5 percent of gift cards, a total of

$2.75 billion worth or more, are never redeemed and more recently (2006) consumers spent $73

billion on gift cards of which approximately 5-10 percent–worth between $3.65 and $7.3 billion

are never redeemed. A 2005 Bankrate study showed that the denomination ranged from $5 to

$5,000. Bankrate data showed that the average person spent about $44 per gift card.

Gift Certificates/Gift Cards issuers range from hitting the buyer with purchase fees, activation

fees and shipping fees, while the user can be hit again with inactivity fees or redemption fees.

Gift Certificates/Gift Cards expiration periods range from six months to five years while activa-

tion period fees range from 12 to 24 months.

BS/mt