Warning: Gift Cards Expire

The fine print on these popular incentives tells if their value will dwindle with time

In this summer’s blockbuster film,War of the Worlds, aliens rise up after many years of lying dormant, encrusted in the earth.
Dormancy is a different issue in the incentive world but likewise disturbing. When you dole out gift cards or credits for individual incentive trips, winners often must use them within a prescribed time limit. Otherwise, the value goes “dormant,” disappearing into the hands of the retailer or, in some cases, the government. Here’s how the law works.

One of the old common-law traditions is the “doctrine of escheat.” This means if you do not use or protect an item that has been assigned a monetary value e.g., you don’t cash a dividend check, or you don’t notify the bank holding your money-market accounts when you change your address the value reverts to the state government by “escheat” when the check expires or the account matures. Statutes of limitations and statutes for escheat vary from state to state.

Dormancy issues also affect gift certificates and gift cards, very popular incentive prizes. The small print, which most people don’t read, indicates the gift’s life expectancy, after which the money reverts to the state.
    There also can be hidden fees. If the card hasn’t been used within the specified time, and it doesn’t expire, the fine print might indicate the department store, retailer or other issuer of the card can begin to dwindle its value down to zero, usually a month at a time.

In some cases, winners can take action to avoid these outcomes. But first they have to know the variables. When giving out prizes, winners should be told how long they have to redeem the awards.
    Planners also can tell winners that if they haven’t used the incentive travel award or gift card, they might be able extend the expiration date to prevent the gifts from dwindling into nothing. This generally is possible, with the exception of black-out periods for travel, for no extra cost.

Many states are taking action to protect gift-card recipients by expanding the laws of escheat. Some protections being written into law include:
    " Expiration dates must be printed on the face of the card in bold letters;
    " Merchants presented with expired cards must reissue the card with a value equal to whatever remains on the expired one, or
    " Cards must be valid indefinitely with no restrictions or hidden fees. We see this most with department store gift cards to which money can be added.
    When there is no expiration date on the card or retailers are prepared to honor expired cards, states leave well enough alone. Such cards are the same as cash and anyone can use them. They never fall under the laws of escheat.

Be selective when choosing any incentive. Suppliers who work with major department stores, promotional products companies and the like are apt to steer clear of gift cards that have dormancy issues.
    A good source of information is the Incentive Federation (www.incentivecentral.org), which protects the rights of organizations and monitors the ethical use of incentive programs.
    If your incentive still has dormancy issues, ask if the supplier or retailer complies with all state laws. Is this compliance noted in their contract? Is the supplier or retailer knowledgeable enough on the issues to speak to your concerns? If the terms of use cause you concern, you might wish to consider a different prize.

Jonathan T. Howe, Esq., is a senior partner in the Chicago, St. Louis and Washington, D.C., law firm of Howe & Hutton Ltd., which specializes in meetings, travel and hospitality law. Legal questions can be e-mailed to him at[email protected].