Fed Issues Final Rules on Gift Card Fees, Expiration Dates


The Federal Reserve Board on Tuesday released final rules that restrict the fees and expiration dates that apply to gift cards. The rules are intended to protect consumers from certain unexpected costs and require that gift card terms and conditions be clearly stated. The rules go into effect Aug. 22.

 

Previous JofA articles have focused on accounting issues related to gift cards, including proper accounting treatment of gift card sales and the application of state escheat laws to “breakage,” which is the portion of gift card balances that consumers fail to redeem.

 

The final rules prohibit dormancy, inactivity and service fees on gift cards unless: (1) the consumer has not used the certificate or card for at least one year; (2) no more than one such fee is charged per month; and (3) the consumer is given clear and conspicuous disclosures about the fees. Expiration dates for funds underlying gift cards must be at least five years after the date of issuance, or five years after the date when funds were last loaded.

 

The final rule says that a provision pre-empts a state law that is inconsistent with the provision and only to the extent of its inconsistency. The regulation further provides that a state law is not inconsistent with any provision if it is more protective of consumers.

 

The rules generally cover 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 brand.

 

The final rules are issued under Regulation E to implement the gift card provisions in the Credit Card Accountability Responsibility and Disclosure Act of 2009.

 

SPONSORED REPORT

Click-through nexus: Pushing the boundaries of sales tax compliance

Sales and use tax compliance has been complicated by nexus expansion. In this report, we provide an overview of this issue and include a handy state-by-state summary of click-through nexus or notification requirements.

QUIZ

News quiz: Making allowances for the kids and the economy

Recent news gives CPAs insight into Americans’ attitudes about children and money and gauges outlook on the economy. See how much you know about recent news and reports with this quiz.

CHECKLIST

Auditing risks in culture

Cultural flaws can seriously damage an organization. Here’s how internal auditors can reduce risks by embedding culture audits into existing audit programs.