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

Year-end tax planning and what’s new for 2016

Practitioners need to consider several tax planning opportunities to review with their clients before the end of the year. This report offers strategies for individuals and businesses, as well as recent federal tax law changes affecting this year’s tax returns.

QUIZ

News quiz: IRS warning on cyberattacks and a change in pension rules

Once again, the IRS sounds the alarm about a threat from cyberthieves. See how much you know about this and other recent news with this short quiz.

CHECKLIST

Bolster your data defenses

As you weather the dog days of summer, it’s a good time to make sure your cybersecurity structure can stand up to the heat of external and internal threats. Here are six steps to help shore up your systems.