November 16,
2009
The Federal Reserve Board has announced proposed rules that it says "would restrict the fees and expiration dates that
may apply to gift cards. The rules would protect consumers from certain unexpected costs and would require that gift card
terms and conditions be clearly stated."
Highlights of Proposed Gift Cards Rule The proposal would amend Regulation E to implement the gift card provisions of the
Credit Card Accountability Responsibility and Disclosure Act of
2009 (Credit CARD Act). The
proposal
would set forth new protections for consumers that purchase or use certain prepaid
products, primarily gift cards.
Products covered. The proposal applies to gift certificates, store gift cards, and general
use
prepaid cards, as those terms
are defined in the Credit CARD Act.
o
Covered products include retail gift cards, which can be used to buy goods or
services at a single merchant or affiliated group of merchants, and networkbranded
gift cards, which are redeemable at any merchant that accepts the
card
brand.
o Consistent with the statute, the proposed rule would not apply
to other types of
prepaid cards,
including reloadable prepaid cards that are not marketed or labeled
as a gift card or gift certificate, and prepaid cards received through a loyalty,
award or promotional program.
Restrictions on dormancy, inactivity, or service fees. The proposed rule prohibits a
person from imposing a dormancy, inactivity,
or service fee with respect to a gift
certificate,
store gift card, or general-use prepaid card.
o
Dormancy, inactivity, and service fees may only be assessed for a certificate or
card if: (1) there has been at least one year of inactivity on the certificate or card;
(2) no more than one such fee is charged per
month; and (3) the consumer is given
clear
and conspicuous disclosures about the fees.
o
Fees subject to the proposed restrictions would include monthly maintenance or
service fees, balance inquiry fees, and transaction-based fees, such as reload fees
and point-of-sale fees.
Restrictions on expiration dates. The proposed rule prohibits
the sale or issuance of a gift
certificate,
store gift card, or general-use prepaid card that has an expiration date of less
than five years after the date a certificate or card is issued or the date funds are last
loaded.
o The expiration date restrictions would apply to a consumer’s funds, and not to the
certificate or card itself. The proposal includes
provisions intended to help ensure
consumers
have at least five years to use a certificate or card from the date of
purchase.
o
The proposed rule prohibits the imposition of any fees for replacement of an
expired card or certificate if the underlying funds remain valid
