Red Lobster may pay the price on gift cards

One of the more interesting developments in retailing the last few years -- well, there have been two of them -- are the explosion in gift cards and bridal registries. First, the latter. Once confined to linens and dishes, we've seen stores expand the mode to include every piece of furniture imaginable and even power tools. Couples need all the help they can get getting started, even if it means going to odd places like Home Depot or Canadian Tire. That's a good thing, as Martha Stewart would say.

Perhaps not so good are the concept of gift cards. They have replaced traditional gift certificates over the years, and have something paper usually doesn't -- the ability to reload money so it can be used again and again. What has happened, however, is that many people have simply hoarded the cards without ever using them -- and because they are in effect accounts payable on the side of the stores, the potential liability can sometimes run into the hundreds of millions.

So some stores, quietly, decided to start charging a service fee to keep the accounts open. This has resulted in some people discovering they had only a few dollars left on what they thought was a 50 or 100 dollar card. One of these companies was Red Lobster, owned by the Darden Group. Recently, the US Federal Trade Commission said that the Red, along with some other companies, were being less than honest by not disclosing the service charges. The companies said baloney, we've always disclosed it -- in the fine print.

In the Darden case, the FTC is asking for $30 million to settle out of court. Like any of that will actually flow back to the consumers.

Far as I can tell, no such protection exists for Canadian consumers, at least in the common law provinces. It's on a province by province basis, and consumer "protection" laws other than the obvious exceptions of "bait and switch" and deceptive advertising actually bear in favour of retailers. These laws were meant to ensure fairness for B2B -- business to business -- transactions, not for consumers. There is somewhat more protection for residents of Québec under the Civil Code, but even then there are limits. (Don't ask me to cite what article -- I'm not a lawyer.)

This is one area that screams for national standards. And, at the very least, retailers should be compelled to state up front what the "maintenance fees" are. Better yet, buy a general purpose gift card with no fees and beg the person you're giving it to to use it in 30 days or less so the retailer or credit card company doesn't even have a chance to enrich themselves -- they have enough money as it is.

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