Gift Cards a Real Gift for VISA…Cha Ching

November 24th, 2010. By LucyC

So—just when you think that banks and credit card companies cannot—could not—would not?—come up with or instigate any further deceptive business practices, they have. Are you sitting down?

A man and a woman in Illinois have filed a class action this week against VISA, Services Credit Union and 1st MidAmerica Credit Union alleging that the companies failed to disclose administrative fees for gift cards. Now, before you blow this off because it doesn’t sound like a big deal—let me tell you, it stinks.

Short version—Karen Rhodes bought her father-in-law, Gene Rhodes, a gift card with a stated value of $50 valid through several months. However, by the time her father-in-law went to use the gift card it was only worth $2! Why? Undisclosed fees charged against the gift card.

The complaint states: “Defendants placed the valid thru date conspicuously on the front of the GiftCard with the intent that plaintiff and all those similarly situated will rely on the valid thru date when, in fact, defendants knew that, due to defendants’ application of Administration Fees, the GiftCard would not retain its stated value through the valid thru date.”

And “On information and belief, and unknown to Ms. Rhodes, at the time of her purchase of the GiftCard, the actual cash value of the GiftCard was only $35.00, due to the Defendants’ application of administrative fees of $2.50 per month prior to the date of purchase.”

In other words the ‘undisclosed fees’ are deducted from the value of the gift card on a monthly basis until the card is used, so the value when used is not, in fact, the same as the value of the card when originally purchased.

Unbelievable.

I want to know who gets paid to think these ‘business practices’ up? I hope they’re well paid—because it’s pretty dirty work. Not only is it highly deceitful—if, in fact, it is true—but it also usurious. Convince me that Visa really needs to charge $2.50 a month in administration fees for a $50 gift card. Go ahead. I can’t wait to hear the argument.

And what about the poor sap of a consumer? How are you ever supposed to protect yourself? And, at the risk of stating the obvious, given that Christmas, Hanukah and the ‘holidays’ in general are virtually upon us, and gift cards are a very popular, and up until now I would have thought practical, alternative to the obligatory pair of socks, these companies no doubt stand to make some very serious cash in the next few months. Heaven knows they need it.

If any of this is sounding familiar—check out the lawsuit. The class consists of all holders of VISA Gift Cards issued by the defendants that lost any of the value of the original purchase prices before the expiration of the valid through date due to administrative fees.

And, if you’re considering purchasing gift cards—maybe call the credit card company first—find out about any administration fees that might be lurking in the wings. In the meantime—Happy Holidays!

Tags: 1st MidAmerica Credit Union, Credit Card fees, Services Credit Union, Visa, VISA Gift Cards

This was posted on Wednesday, November 24th, 2010 at 12:38 pm and is filed under Emerging Issues . Feel free to respond, or trackback. Read our comments policy.