The Federal Reserve issued new rules on gift card fees and restrictions set to take effect on August 22, 2010.
The rule amends Regulation E, and implements the gift card provisions of the Credit Card Accountability Responsibility and Disclosure Act of 2009.
Gift certificates, store gift cards, and general-use prepaid cards are all covered under the rule, although reloadable prepaid cards that are not marketed as a gift card, and prepaid cards received through a loyalty, award, or promotional program, are not included.
The rule has two major changes: It imposes restrictions on dormancy, inactivity, or service fees, as well as restrictions on expiration dates.
Under the rule, expiration dates must be at least five years after the date a gift card or certificate was issued or the date funds were last loaded. In addition, the rule prohibits any fees for replacing an expired card or certificate or for refunding the remaining balance if the underlying funds remain valid.
Dormancy, inactivity, and service fees can only be assessed under the following circumstances: if at least one year of inactivity on the card or certificate has passed; if no more than one such fee is charged per month; and if the consumer was given clear and conspicuous disclosures about the fees. The restrictions apply to fees such as monthly maintenance or service fees, balance inquiry fees, and transaction-based fees, such as point-of-sale fees, ATM fees, and reload fees.
Why it matters: The Federal Reserve’s new rule only adds to the panoply of laws covering gift cards. It does not preempt existing state laws on gift cards that are more protective of consumers, so issuers remain subject to both the federal rule as well as differing state laws across the country. Issuers should be aware that many states go above and beyond the federal rule, and any cards that are marketed nationally must comply with the patchwork of laws across the country.