As expected, several states have enacted gift card legislation this year—although not nearly as many as were considering such action.

Florida passed a law that prohibits expiration dates on gift certificates that were purchased for value, as well as “credit memos”—such as store credits for returned items. The law also forbids post-sale service charges, dormancy fees, account maintenance fees and cash-out fees.

An exception is provided for gift certificates that are not paid for by consumers, when given as a charitable contribution, or as part of an employee-incentive program, consumer-loyalty program or promotional program. The expiration dates on these certificates must be prominently displayed and are statutorily limited to specified periods.

A gift certificate also may have an expiration date if it is part of a package related to a convention, conference, vacation, or sporting or fine arts event, as long as the majority of the value paid is attributable to the event.

Like laws passed in other states, the Florida statute provides that unredeemed gift certificates sold or issued by financial institutions or “money transmitters” and redeemable by multiple merchants must be reported as unclaimed property, which escheats to the state. Other unredeemed gift certificates are exempt from such reporting requirements.

Florida’s law went into effect June 28.

Other States

Additional states that have passed laws addressing gift cards and certificates this year include Arkansas, Kansas, Minnesota, New Mexico and Utah.

Minnesota’s law is similar to Florida’s, and prohibits expiration dates and fees on gift certificates that were purchased for value. The law contains exemptions for certificates that are distributed as part of loyalty and other promotional programs. It became effective Aug. 1.

New Mexico passed legislation that prohibits gift certificates from having an expiration date that is less than 60 months after the date upon which the gift certificate was issued. If an expiration date is not conspicuously displayed on the gift certificate, the certificate is deemed to contain no expiration date. Issuers may not charge fees “of any kind” after the sale of the certificate that would reduce the value of the certificate. The law became effective July 1.

The Kansas statute also prohibits expiration dates of less than five years after the date of purchase, and forbids fees from being charged within one year of the date of issuance.

A new Arkansas law forbids the imposition of expiration dates and fees less than two years after a gift card was issued. It requires any expiration dates and fees to be disclosed in 10-point font on the gift card or in a separate statement.

Utah’s law requires the disclosure of expiration dates and fees on the gift certificate or its packaging. For more information, see "Utah Passes Gift Card Law; Majority of U.S. States Consider Same" pub. date March 14, 2007.

Last fall, Pennsylvania passed a law that provided that the proceeds from unredeemed gift cards and certificates with expiration dates and/or fees would revert to the state rather than to the issuing supplier. However, cards and certificates that do not contain expiration dates and post-sale fees would be exempt from reversion. For more information, see “Pa. Governor Signs Bill To Encourage No-Expiration Gift Cards,” pub. date Nov. 21, 2006.

States reported to have examined the issue this year, but which apparently have not acted, include Alaska, California, Connecticut, Delaware, Hawaii, Iowa, Illinois, Indiana, Kentucky, Maryland, Michigan, Mississippi, Missouri, New Jersey, North Dakota, Nebraska, Nevada, New York, Oklahoma, Oregon, Rhode Island and Tennessee.

The expiration dates and fees associated with gift cards may be having an affect on their popularity. Women’s Wear Daily recently reported that consumers polled have described the practices “irritating.” The growth of gift card purchases, which increased from $24 billion in 2005 to $29 billion in 2006, may be slowing, reports the TowerGroup, a consulting group within MasterCard WorldWide.

Why This Matters: As consumers voice frustration over expiration dates and fees, states are responding in piecemeal fashion with varying rules. Hence, unless a national standard is established, retailers will need to become familiar with the different laws in each state in which they do business.