Q&A: Gift Card Rules

What legal protections apply to gift cards?

What do the new federal rules governing the use of gift cards say?

In recent years consumer advocates have raised concerns over some of the practices associated with gift cards, including the amount of fees that can be assessed, and expiration dates. In the past many consumers had no idea whether their gift cards had an expiration date, or if they had lost some of their value if they were not used within a short period of time. Even where fees or terms were disclosed, the disclosures typically were neither clear nor conspicuous.

Last year Congress responded to these concerns by enacting the “Credit Card Accountability Responsibility and Disclosure Act of 2009″ (also called the ”Credit CARD Act of 2009″). The Act provides consumers with significant new protections in the use of gift cards and apply to the following two types of gift cards sold on or after August 22, 2010:

  • Store gift cards, which can be used only at a particular store or group of stores, such as a book store, restaurant, or clothing retailer.
  • Gift cards with a MasterCard, Visa, American Express, or Discover brand logo. These cards generally can be used wherever the brand is accepted.

Here is a summary of the new protections that apply to cards sold on or after August 22, 2010:

  • Limits on expiration dates. The money on your gift card will be good for at least five years from the date the card is purchased. Any money that might be added to the card at a later date must also be good for at least five years.
  • Replacement cards. If your gift card has an expiration date you still may be able to use unspent money that is left on the card after the card expires. Check your card to see if expiration dates apply.
  • Fees disclosed. All fees must be clearly disclosed on the gift card or its packaging.
  • Limits on fees. Gift card fees typically are subtracted from the money on the card. Under the new rules, many gift card fees are limited. Generally, fees can be charged if you haven’t used your card for at least one year, and you are only charged one fee per month. These restrictions apply to fees such as (1) dormancy or inactivity fees for not using your card; (2) fees for using your card (sometimes called usage fees); (3) fees for adding money to your card; and (4) maintenance fees.

You can still be charged a fee to purchase the card and certain other fees, such as a fee to replace a lost or stolen card. Make sure you read the card disclosure carefully to know what fees your card may have.

These new rules apply only to gift cards, which are just one type of prepaid card. The new rules do not cover other types of prepaid cards, such reloadable prepaid cards that are not intended for gift-giving purposes, and cards that are given as a reward or as part of a promotion. Regardless, you must be clearly informed of any expiration dates or fees for these cards.

Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.

This content is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. "From a Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations." Due to the nature of the U.S. legal system, laws and regulations constantly change. The editors encourage readers to carefully search the site for all content related to the topic of interest and consult qualified local counsel to verify the status of specific statutes, laws, regulations, and precedential court holdings.

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