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March 27, 2007
Attention KMart Shoppers, Your Gift Card is Worthless
Recently, the FTC settled charges that KMart had engaged in deceptive conduct by selling incredibly-shrinking gift cards. But, is the lack of will to punish violators by making them pay becoming a trend at the FTC? The FTC's complaint alleges that since 2003, Kmart did not disclose adequately that after 24 months of non-use, a $2.10 "dormancy fee" would be deducted from the card's balance for each month of inactivity, resulting in a $50.40 reduction from the card's value if the card was not used for 24 months. In many instances, the Commission alleges, consumers did not learn of the fee until they attempted to use their cards. The settlement is quite weak. KMart promised to provide disclosures (but not to stop the fees) and to pay any consumers who figure out how to file a complaint and can prove it, but with no additional civil penalty or disgorgement of ill-gotten gains. To their credit, Commissioners Pamela Jones Harbour and Jon Leibowitz "dissent[ed] in part from the proposed consent agreement because they believe the remedy should include disgorgement of ill-gotten profits." It's the second case in just over a month where Commissioner Leibowitz has dissented due to a failure to make the violators pay. You can file comments for or against the draft settlement until April 10. For information on good and bad gift cards, see the annual gift card report of the Montgomery County Division of Consumer Affairs, which assisted the FTC.
Posted by Ed Mierzwinski at March 27, 2007 12:46 PM
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