According to the announcement, stores, restaurants, credit card companies, and other issuers of gift cards are required to provide consumers with full disclosure of all terms and conditions of the gift cards, particularly in the areas of inactivity charges, service fees and expiration dates.
New Conditions Must Be Met
Under the final rules, three conditions must be met if gift-card issuers want to charge inactivity or service fees. Fees can be applied only if the consumer hasn't used the card within a one-year period, if there's no more than one fee charged a month, and if consumers are made aware of such fees.
"Concerns have been raised regarding the amount of fees associated with gift cards, the expiration dates of gift cards, and the adequacy of disclosures," the Fed said. "Consumers who do not use the value of the card within a short period of time may be surprised to find that the card has expired or that dormancy or service fees have reduced the value of the card."
Goodbye Garbage Fees
Attorney General Richard Blumentha of Connecticut has been very active in fighting for a change in gift card regulations.
"For five years, I have fought federal regulators who cravenly kowtowed to companies seeking to unfairly confiscate consumer cash. Companies used dormancy, activation and other garbage fees, as well as expiration dates, to unfairly deprive consumers of their hard-earned dollars. Like so many schemes of the last decade, this bled consumers white with petty, underhanded junk fees for nothing." Blumenthal said.
The new rules will go into effect on August 22, 2010.
The Official Language: Highlights of Final Gift Card Rule
Products CoveredThe final rule applies to gift certificates, store gift cards, and general use prepaid cards, as those terms are defined in the Credit CARD Act.
- 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 network branded
gift cards, which are redeemable at any merchant that accepts the card
- Consistent with the statute, the final rule does 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 FeesThe final rule restricts dormancy, inactivity, or service fees with respect to a gift certificate, store gift card, or general-use prepaid card.
- Dormancy, inactivity, and service fees may only be assessed for a certificate or
- (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;
(3) The consumer is given clear and conspicuous disclosures about the fees.
- Fees subject to the restrictions would include monthly maintenance or service fees, balance inquiry fees, and transaction-based fees, such as reload fees, ATM fees, and point-of-sale fees.
Restrictions on Expiration DatesThe final 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.
- The expiration date restrictions apply to a consumer's funds, and not to the
certificate or card itself. The final rule also includes provisions intended to give
consumers a reasonable opportunity to purchase a certificate or card with at least
five years before the certificate or card expiration date.
- The final rule prohibits any fees for replacing an expired certificate or card, or for refunding the remaining balance, if the underlying funds remain valid.
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