On August 21, 2012, the CFPB issued a notice of intent to determine whether the federal Electronic Fund Transfer Act (EFTA) preempts certain provisions of Maine and Tennessee’s abandoned property laws relating to gift cards.
Under the EFTA, which is implemented by Regulation E, gift cards are to expire in no less than five years. Maine and Tennessee, however, generally deem gift cards abandoned property after two years, and, businesses need not honor the cards after two years under those states’ laws.
Now, the CFPB is seeking comment as to whether Maine and Tennessee’s laws are inconsistent with the EFTA, the nature of the inconsistencies and whether card issuers could comply with both federal and state law. Noting the problems consumers may encounter in recovering funds from the state after they are deemed abandoned, the CFPB recognizes that Maine and Tennessee laws may afford consumers greater protections. For example, funds transferred to Maine or Tennessee would be protected from inactivity fees or possible loss due to the issuer’s bankruptcy. If the CFPB finds that the state laws actually afford greater protection than federal law, the CFPB would not find the state laws preempted.
The Bureau’s request for comment was sparked by a request for rulings by payment card industry groups, which the CFPB did not identify. These requests were originally brought to the Federal Reserve. However, the CFPB now handles the request along with many other federal statutory responsibilities since the passage of the Dodd-Frank Act.
Comments are due on or before October 22, 2012.