Posts Tagged retail
This week, I spoke to merchants from the Historic East Village and answered questions about gift cards. Gift cards, or gift certificates, are subject to state and federal restrictions – some overlapping, some conflicting and some confusing.
Federal regulations are found primarily in the 2009 Credit Card Accountability Responsibility and Disclosure Act (“the Credit CARD Act”). This Act gives the Federal Reserve Board authority to govern business practices regarding credit cards, gift cards, pre-paid cards and the information consumers receive. The federal regulations are controlling unless a state enacts laws which provide greater protection for consumers.
“Can my business place expiration dates on gift certificates issued?” Yes. But federal regulations allow expiration dates as long as certain requirements are met. Requirements include:
- allowing a purchasing consumer at least five years before expiration;
- providing a toll free number or website where information about the card can be obtained;
- providing information about replacing the card; and
- informing of any fees charged against the balance and where information about the fees can be obtained.
In Iowa: Iowa law states that unredeemed gift card funds are considered abandoned after three years have lapsed since purchase or last use, compared with the five-year requirement in the federal regulations. The Federal Reserve Board chose to not preempt (overrule) state laws regarding abandonment of property which took effect before the federal five-year mandate. The board instead reserved the right to declare individual states’ laws preempted on a case-by-case basis. The board has not yet ruled on Iowa’s three-year abandonment law regarding unused gift cards, leaving open the possibility that a gift card issuer will have to turn over abandoned property to the state treasurer after three years, but honor gift cards for five.
“What are the reporting requirements after the three year period in Iowa?”
Iowa Code provides that a holder of presumed abandoned property is to file a report regarding the property with the state Treasurer. The code also provides that when filing the report, the property shall be paid or delivered to the treasurer.
“What if I give gift cards to a charity or an auction and receive no money for them?”
Federal regulations create exceptions for cards issued for ‘loyalty, award, or promotional purposes.’ For example, shorter expiration dates are allowed. Significantly, there must be a disclaimer on the face of the card or certificate stating it was issued for loyalty, award or promotional purposes to qualify for this exception.
If you are confused, the Federal Reserve Board has a guide to gift cards.
* Be careful. It appears that the Iowa Attorney General guide came out in 2007 and the most recent federal rules came out in 2010.