Kmart to refund gift-card fees

NEW YORK (CNNMoney.com) -- The Federal Trade Commission announced this week that Kmart Corp. has agreed to institute a gift-card fee refund program as part of its settlement with the agency, which charged the retail chain with engaging in deceptive practices in marketing and selling its gift cards.

Specifically, the FTC charged that since 2003 Kmart failed to provide sufficient disclosure of a $2.10 per month dormancy fee that would be charged retroactively after 24 months if the card was not yet used. The FTC further alleged that since December 2005 Kmart's Web site said explicitly that its gift cards never expire.

For customers who tried to use their cards for the first time after 24 months a fee of at least $50.40 ($2.10 x 24 months) was deducted from the amount on the card. That resulted in the effective expiration of cards valued at $50.40 or less.

"If fees or restrictions apply, gift card issuers must fully and clearly disclose them," FTC Chair Deborah Platt Majoras said in a statement.

Going forward, Kmart also agreed to clearly disclose its gift-card fees in advertisements and on the front of its gift cards. The company discontinued its dormancy fee in May of last year, according to the FTC.

The refund program would apply to all cards issued before May 1, 2004. To get a dormancy fee reimbursement, you must provide the gift card number on which the fee was assessed, as well as your mailing address and phone number. Kmart will provide information about the refund program on its Web site, including a toll-free number, e-mail address and mailing address, any of which consumers can use to claim their refund.

A spokesperson for Kmart, which is owned by Sears Holdings Corporation (Charts), said she didn't know how many gift cards qualified for refunds. But, she noted, "In an effort to better meet our customers' needs, Kmart has removed all fees and expiration dates from its gift cards."

The proposed settlement will be subject to public comment for 30 days, and presuming that period of comment doesn't affect the terms of the settlement, the refund program is likely to go into effect by early summer, according to an FTC spokesman.

If you have any questions or concerns about the refund program, you can contact the FTC's consumer hotline (202-326-3569).

Kmart competes against Target (Charts) and Wal-Mart Stores Inc. (Charts)

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