credit cards

New gift card rules

Tuesday, March 23
Posted 4 p.m.

Bankrate reporter Leslie McFadden contributed this entry.

Today the Federal Reserve Board issued a final rule on gift card fees and expiration dates that take effect Aug. 22, 2010. The Credit Card Accountability, Responsibility and Disclosure Act of 2009 ordered the Federal Reserve to set the guidelines for gift card restrictions.

The rule applies to gift certificates, store gift cards, and general-use prepaid cards intended for personal, family or household use. It doesn't cover gift cards for business travel expenses or cards not marketed as gift cards, for example.

Consumers will get more time to spend the funds on the card before nonuse fees eat up the balance. The final rule bans dormancy, inactivity and "service" fees unless three conditions are satisfied: The card hasn't been used in a year, only one fee is assessed a month and clear disclosures of the fees are stated on the card or certificate and are provided to the purchaser of the gift card. Service fees include recurring maintenance fees and activity-based surcharges for actions such as reloading the card with money.

Americans also get five years to spend the funds on the card. Funds can't expire for at least five years from the date of issuance or the date that funds were last loaded onto the card, and cards with shorter expiration periods for funds are banned from being sold or issued. The seller of the card must disclose the difference (if any) between the card expiration date and the expiration of the funds on the card.

The rule also prevents gift card issuers from charging a fee to replace an expired card if the funds are still valid.

Other fees, such as issuance or cash-out fees, must be disclosed at the time of purchase.

The card or certificate must have a toll-free number for consumers to call for information about fees or replacement cards or certificates.

The final rule spans 177 pages.

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