Selling Gift Certificates the Legal Way
You may have considered offering gift certificates through your website.
Or maybe you already do.
In the past few years, gift cards and certificates have been the subject of federal and state legislation to protect consumers from overly restrictive and abusive gift card practices. We want you to know the federal legal requirements for issuing and using gift cards and gift certificates and where to look for your state’s specific requirements.
In 2010, the Credit Card Accountability Responsibility and Disclosure Act of 2009 (the CARD Act) went into effect. The CARD Act sets forth the bare minimum of rules governing all gift cards in the United States. The Federal Trade Commission governs the use of gift cards at the federal level. The states are free to create even stricter rules.
Gift cards come in two forms: 1) retail gift cards or certificates, which can be used only at the specified store, and 2) bank gift cards, which can be used wherever the brand of card (MasterCard, Visa, American Express, etc.) is accepted. In this post we will look at the rules surrounding retail gift cards and gift certificates.
Expiration Dates
Under The CARD Act, money on a gift card or certificate cannot expire for at least five years from its purchase or the most recent date money was loaded onto the card. If the card is marked with an expiration date before the five years is up, the retailer must transfer the balance to a replacement card for the consumer. Finally, the expiration date must be clearly disclosed on the card itself.
Furthermore, some states have even stricter requirements on gift card or certificate expiration dates. California and Florida, for instance, do not permit most retail gift cards or certificates to expire at all. Some states, like Arizona and Georgia, only permit expiration dates that are clearly visible to the customer at purchase. Others have expiration dates longer than the federally mandated five years, sometimes six or seven years.
Fees
Fees are also governed by The CARD Act. The Act restricts any inactivity fees to when the card has not been used for over a year, and then only allows one charge per month. The federal rules do permit a fee to buy the card or replace a lost or stolen card. All fees must be clearly disclosed on the card or its packaging.
The states have various rules on fees too. Some states – Kentucky and Minnesota, for example – do not allow any fees. Most states allow fees in some capacity, but have limits on how or when they may be imposed. In Maryland, fees are not allowed for four years. Louisiana permits only a one-time handling fee of $1. Nevada only allows fees after the first year, and then only at a maximum of $1 per month. And it does not permit any dormancy fees for the first three years. For other states, like Arizona, the only restriction on fees is that they must be fully and conspicuously disclosed to the consumer. As you can see, each state has its own specific rules on how and when a gift card issuer may assess fees. It is important to know your state’s rules when considering whether to issue gift cards or certificates for your products or services.
Some Final Thoughts…
Your state may also regulate when you can or cannot refuse to accept a gift card, such as during sales or holidays, or as partial payment for an order. You may also want to consider how you will track gift card purchases and transfers, and whether you will (or if you are required by your state’s laws to) replace gift cards that are lost or stolen. However you decide to implement and manage your gift cards and gift certificates, best practices indicate that you disclose every restriction in clear, easy to understand text on the face of the card and/or packaging.
Extra Reading
For a general overview of the federal legislation governing gift cards, look here:
https://www.consumer.ftc.gov/articles/0182-gift-cards
For your state’s specific laws, here are some good resources:
https://advocacy.consumerreports.org/research/state-gift-card-consumer-protection-laws-2013-update/
https://www.ncsl.org/financial-services/gift-cards-and-gift-certificates-statutes-and-legislation