In its first enforcement action involving gift cards, the FTC claims that Kmart advertised its branded gift cards as good as cash when, in fact, hidden fees would render them worthless after a certain amount of time.
Specifically, the FTC alleged that Kmart, a subsidiary of Sears Holding, told consumers that its gift cards never expired. However, the agency claims the retailer didn't clearly inform customers that a $2.10 monthly fee kicked in retroactively if a gift card went unused for two years. According to the FTC complaint, this meant an unused card's value was immediately reduced by $50.40 after two years.
Without admitting any wrongdoing, Kmart has agreed to settle the FTC charges. Under the agreement, which is not final, the retailer will reimburse the dormancy fees to consumers who provide an affected gift card's number, a mailing address, and a telephone number. Kmart has also agreed to publicize the refund program on its website, including a toll-free number, e-mail, and postal address so that eligible consumers can seek a refund.
