New rules for gift card fees and expiration dates take effect Aug. 22 as part of a final batch of provisions from the Credit CARD Act of 2009. New rules for credit cards, including limits on penalty fees and required reviews of previous rate increases, also go into effect the same day.
The new gift card provisions apply to gift certificates, store gift cards and general-use gift cards, such as Visa or American Express gift cards, that can be used anywhere the network brand is accepted. Other cards not marketed as gift cards, such as prepaid calling cards and rebate cards offered by stores, are not subject to the restrictions in the CARD Act rules.
What the new rules mean for youLonger expiration periods. You'll have more time to spend the money on your gift card before it expires. A gift card balance can't expire for at least five years after the date the card it is purchased or the last load of funds, whichever is later. If the card itself expires, but the funds haven't, you can request a replacement card at no charge.
Limits on certain fees. As a gift card recipient, you'll have more time to spend the balance before fees deplete it. No inactivity or "service fees," such as balance inquiry fees or ATM fees, can be charged unless the card hasn't been used in a year. After 12 months of inactivity, only one such fee can deduct from the balance per month. This restriction does not apply to other fees likely to be charged only once, such as activation fees or card replacement fees for a card reported lost or stolen.
As noted in a previous blog post on the gift card rules, store gift cards or "closed-loop" cards don't typically charge fees.
New on-the-card disclosures. Gift cards will be required to have key information on them. On-the-card disclosures include the frequency and amount of any fees that may be charged and if applicable, that a fee may be assessed for inactivity. Expiration information must also go on the card, in addition to a toll-free number to call for additional information and a website address, if available.
Delay of on-the-card disclosuresRecently passed legislation known as the ECO-Gift CARD Act delays the date by which the industry must print compliant gift cards until after the holiday season. Existing stock produced before April 1, 2010, can be sold through Jan. 31, 2011, as long as the cards meet the other requirements regarding expiration and fees and disclose consumers' rights through alternative methods, such as in-store signage and advertising.
"I believe they'll use websites and in-store signage to say 'our disclosures are available at this website' or 'call this toll-free number,'" says Dan Horne, an associate professor of marketing at Providence College in Providence, R.I.
The consumer protections from the CARD Act still go into effect Aug. 22. "The five-year expiration and all that, that still applies, but the disclosure requirements on the cards are just exempted for existing stock," says Gene Truono, managing director of BDO Consulting in New York.
The ECO-Gift CARD Act prevents the destruction of more than 100 million gift cards that didn't have the required disclosures printed on them, according to the Network Branded Prepaid Card Association. A spokeswoman for the NBPCA said the April 1 date was chosen because that was the day the final gift card rule, issued by the Federal Reserve, to implement the provisions under the CARD Act, was published in the Federal Register.
After Jan. 31, 2011, gift cards on store shelves must have the required disclosures printed on them. Any new cards produced after Aug. 22 will be held to the same requirement. "If you print new cards you have to put the new disclosures on them," says Truono.
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