Live from the IMA Executive Summit: Update on Gift Card Legislation

Legislation regulating gift cards continues to be enacted, adding to an already confusing array of laws that often vary from state to state.

“You have a real mish mash of rules,” said Incentive Federation attorney George B. Delta.

Delta outlined a number of important legislative changes that have taken place over the last year or so regulating gift cards and warned that gift cards could be federally legislated in future, eliminating dormancy fees.

The following are highlights from his discussion:

• California amended its laws effective Jan. 1, 2004 to clarify that the term “gift certificate” includes gift cards, except for certain cards that may be used with multiple sellers of goods and services. Although gift certificates generally cannot contain dormancy or other service fees, a gift card may contain a dormancy fee if the value remaining is $5 or less each time the fee is assessed; the dormancy fee is $1 per month or less; the card has been inactive for 24 consecutive months; the holder may reload or add value to the card and the card contains a statement in at least 10-point type stating the amount and frequency of the fee, that the fee is triggered by inactivity and at what point the fee will be charged. Finally, a gift card or certificate sold as a gift for another person may state a redemption date. Because this is an exception to the “no expiration date” rule, a seller that chooses to state a redemption date must give the purchaser a full refund of the amount paid for the card if the recipient does not redeem it by the redemption date.
• Connecticut enacted legislation effective Aug. 16, 2003 that gift certificates cannot contain expiration dates and issuers may not impose dormancy or any other fees that reduce a certificate’s value.
• Massachusetts, effective June 1, 2003, has expanded the definition of gift certificates so that it encompasses gift cards and merchandise credits as well as paper certificates. The expiration date of a gift certificate must be stated on its face and it cannot be less than seven years. Violators can be fined up to $300. Gift certificates that are not clearly marked with both an issue and expiration date will be good forever. If 90% or more of a gift certificate has been used, the consumer can receive cash for the balance.
• New Hampshire prohibits dormancy or any other fees that reduce a certificate’s value.
• New Jersey, New York, Pennsylvania and Rhode Island have considered but failed to enact legislation to prohibit expiration dates. However, such consumer protection legislation may be seen in the near future.