I love giving gift cards. But I’d rather not receive them. My problem is when I get a gift card, I want to save it for a worthy purchase. Being the penny pincher that I am, I don’t want to use a gift card from Christmas to buy something mundane, such as pantyhose. So I tuck away the card with the intention of using it later to buy something really nice.

That’s where the problem comes in. I often hide these cards so well, I forget where I put them. Or I forget I ever got them.

Sometimes months or even years later I’ll pull out a box or envelope and find an unused gift card.

Fortunately, I’ve been able to use all these saved up cards for their full face value. But that wasn’t the case for many Kmart customers, according to the Federal Trade Commission.

Hidden fees

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 also has agreed to publicize the refund program on its Web site, including a toll-free number, e-mail and postal address so that eligible consumers can seek a refund.

Commissioners disagree

The FTC voted 5-0 to accept the proposed settlement with Kmart, but commissioners Pamela Jones Harbour and Jon Leibowitz issued a separate statement complaining that many consumers who discarded old gift cards they couldn’t use because of the dormant fees won’t get reimbursed. The two commissioners said Kmart should have to give up the money it collected on unredeemed cards.

“We believe the order should go further,” the commissioners said in their statement. “Otherwise, Kmart will remain unjustly enriched by a substantial amount of buried ‘dormancy fees’ while many consumers will have lost the chance for reimbursement because they long ago threw out their seemingly worthless gift cards in frustration.”

Chris Brathwaite, a spokesman for Sears, declined to comment on the proposed settlement other than to say, “In an effort to better meet customers’ needs, Kmart has removed all fees and expiration dates from its gift cards.”

Public can comment

The FTC is accepting public comment on the proposed settlement until April 10. If you had one of these cards, you should weigh in on this debate. And you should certainly speak up if you had a card that you threw away after finding out it was worthless.

Unless you’re in the habit of keeping old receipts, I’m not sure what you can do to verify you had a card, but perhaps somebody has an idea.

Kmart should have to come up with a way to compensate all of its affected customers.

So if you have an idea, send your comments to secretary@ftc.gov. You also can send your written comments to the FTC at the Office of the Secretary, Room H-135, 600 Pennsylvania Ave. N.W., Washington, DC 20580. The FTC requests that any comment filed in paper form near the end of the public comment period be sent by courier or overnight service, if possible, because U.S. postal mail in the Washington area and at the commission is subject to delay because of heightened security precautions.

Because the settlement with Kmart isn’t final, the retailer has not posted any information. However, the FTC has established a consumer hot line at (202) 326-3569 for those who have questions about the refund program.

While I may have my issues with gift cards, they are increasingly popular. During the 2006 holiday season the sale of gift cards generated nearly $28 billion in sales, according to the FTC.

The FTC gets a high five for taking action on this issue. I certainly hope other retailers and businesses take note of the settlement and join Kmart in dropping dormancy fees and expiration dates on gift cards or certificates.

After all, these companies gladly take our money when we buy gift cards. They should honor these cards at their full value whenever they are used.