06/20/2012 11:37 am ET Updated Jun 20, 2012

Five Guys Gift Card Lawsuit Settlement Forces Company To Pay For Charging Illegal Fees

Five Guys Burgers and Fries, the national fast food chain, has agreed in a class-action lawsuit settlement to pay for charging gift card holders illegal fees, the New Jersey Star-Ledger reports. Five Guys charged a $2 monthly fee to gift card holders that did not use their gift cards for 12 months, but New Jersey state law prohibits stores from charging "dormancy fees" on gift cards until they've gone unused for 24 months.

Five Guys will give $50 gift cards to gift card holders that can prove they bought a Five Guys gift card with a dormancy or expiration fee provision in New Jersey on April 4, 2006, or later, according to the settlement. Gift card holders only had until May 29 to file a claim. Five Guys also will pay the plaintiff, Mitchell Storch of Montville, N.J., $2,500 in addition to paying for his $50,554 in costs and legal fees, according to the Star-Ledger.

The restaurant also has agreed to stop selling gift cards with a dormancy fee provision, according to the settlement. The settlement notice can be viewed here.

Because of fees and expirations, gift cards can be a risky choice for a present. Two Borders gift card holders have sued the now-defunct bookstore chain for not informing them the company would void their gift cards. Lawyers claim that Borders wiped out $156 million in unspent gift cards while it was shutting down last September.

New Jersey itself has started to penalize gift card holders for not using their cards. The state government now collects the proceeds from all gift cards that have not been used for two years. As a result, American Express, Blackhawk Network, and InComm have stopped offering gift cards in the state.



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