The Gift that Never Stops Giving: Proposed Changes to Federal Gift Card Law
Senator Richard Blumenthal (D-CT) recently introduced S. 3636, the Gift Card Consumer Protection Act of 2012, which would ban expiration dates and specified fees for inactivity or services on gift certificates, store gift cards, or general-use-prepaid cards ("Cards"), including those issued in connection with loyalty, award and promotional programs ("Loyalty Products"). The legislation would change current federal gift card law, which permits issuers to charge certain fees after 12 consecutive months of inactivity, permits expiration after 5 years, and excludes Loyalty Products from these restrictions if certain disclosures are made. Senator Blumenthal commented: "Today I am introducing legislation to help substantially remedy that problem and to ensure that consumers receive the full value that is stored on their gift cards.
Whether it is a bankrupt company that refuses to honor a gift certificate, a gift card with hidden fees that slowly withers down to nothing, or a 'promotional' gift card that expires in the virtual blink of an eye, consumers in Connecticut and across the nation are in danger of seeing the value of their gift cards disappear."
In summary, the bill proposes to:
· Ban inactivity fees on Cards
· Ban expiration dates on Cards
· Eliminate the exclusion for Loyalty Products
· Provide stronger consumer protections for cardholders when a company that issues or sells gift cards files for bankruptcy protection
Click here to read the complete bill.
Many issuers of Cards will be surprised to learn that the bill would prohibit expiration dates on Loyalty Products. Loyalty Products typically include strategically developed expiration dates designed to incentivize patronage during periods of time when sales are generally slower or when competition is fierce. If expiration dates on these products are prohibited, Loyalty Products may be far less effective for these and other purposes.
For more information on federal gift card law, click here. For additional information on the impact of gamification techniques and related legal issues, check out Jim Gatto's recent presentation Legal Issues with Gamification at the recent GSummit.