On May 22, 2009, President Obama signed into law the Credit Card Accountability Responsibility and Disclosure Act (Credit CARD Act of 2009), Public Law 111-24. Although the bulk of the new law impacts credit card notices, fees, and collections, Title IV of the Act, entitled Gift Cards, creates federal law prohibiting expiration dates of under five years and certain inactivity fees for electronic gift cards and prepaid stored value cards.
The Act amends the Electronic Funds Transfer Act (codified at 12 U.S.C. § 1693 et seq.) to impose new restrictions on dormancy fees, inactivity charges or fees, service fees, and expiration dates for electronic gift certificates, store gift cards, or general-use prepaid cards. With more detailed regulations not set to be issued by the Federal Reserve Board and Federal Trade Commission until February 22, 2010, vendors and retailers should begin reviewing action steps to comply with the new law before it takes effect on August 22, 2010:
- Review policies and practices on expiration dates. The new law prohibits the sale of cards with an expiration date of less than five years from the date the card is issued.
- Review policies on disclosure of dormancy or inactivity fees. The new law prohibits the use of dormancy fees (other than a one-time issuance fee) unless the card has been inactive for a 12-month period and any fee assessed after a 12-month inactivity period is clearly disclosed at the time of purchase.
- Review compliance with various state unclaimed property and specific gift card laws. This federal law does not preempt state laws on gift cards or unclaimed property unless contrary to federal law. For example, if a state allows for an expiration date of no less than three years for gift cards, the federal law will preempt that state law and make the new expiration date five years from issuance. For details on state gift card laws, as well as the unclaimed property laws in each state, please see the National Conference of State Legislators’ summary of these provisions at http://www.ncsl.org/IssuesResearch/BankingInsuranceFinancialServices/GiftCardsandGiftCertificatesLegislation/tabid/12474/Default.aspx
- Paper gift certificates or reloadable stored value cards (like those used by coffee or food services) are not impacted by this law, and are exempted in many state laws.
The Federal Reserve Board and Federal Trade Commission will likely request public comments on the rulemaking for this provision in the fall of 2009, in preparation for publishing regulations in February 2010.
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