Legal Hotline: Gift card promotion

  • Nov 19, 2015

Melissa Melewsky

Q:  We are considering implementing a promotion that would give new subscribers gift cards redeemable at businesses that advertise with us.  Some advertisers want to make the gift cards expire after one year.  Does the law prohibit expiration dates on gift cards?  Are the rules the same for paper and electronic gift cards? 

A:  Federal law prohibits gift cards from expiring for at least five years from the date the card was purchased, or from the last date any additional money was loaded onto the card.  The law expressly excludes from its coverage gift cards issued in paper form only. Pennsylvania law does not prohibit expiration dates and it does not distinguish between paper and non-paper gift cards/gift certificates, but it does treat most unused gift cards/gift certificates as abandoned property that must be reported to the Pennsylvania Department of Treasury, after a specified period of time.  

The federal Credit Card Accountability Responsibility and Disclosure Act or CARD Act, became law in 2009.  The law’s primary intent related to rate and fee reforms within the credit card industry, but it also governs gift cards, including store gift cards, gift certificates, and general use pre-paid cards.   ‘Store gift card’ means an electronic promise, plastic card, or other payment code or device that is redeemable at the merchant or affiliated group of merchants  that issued the card and may have funds added.  “Gift certificates” are defined as an electronic promise that is redeemable at a single merchant or an affiliated group of merchants issued in a specified amount that may not be increased or reloaded.   A “general use pre-paid card” that carries the logo of a payment network like Visa can be used wherever the brand is accepted, and can be reloaded.  The CARD Act expressly excludes from these definitions cards and gift certificates “issued in paper form only.” CARD Act, Section 915(a)(2)(D)(v). 

Under the law, a non-paper gift certificate, gift card and general use pre-paid card cannot expire for at least five years from the date the card was purchased, or from the last date any additional money was loaded onto the card. The law also prohibits inactivity fees unless the card hasn't been used for at least one year.  If a card includes an expiration date, it must be clearly disclosed on the card, and any fees must be clearly disclosed on the card or its packaging. More information on the CARD Act can be found on the FTC website here. http://www.consumer.ftc.gov/articles/0182-gift-cards

Pennsylvania’s Unclaimed Property law requires unused gift cards that have an expiration date or any fees to be reported as unclaimed property within two or three years, depending on the card’s expiration date and/or fee structure. The law requires merchants to track gift card purchases and use, and if the unclaimed property requirements are met, merchants must report unused gift cards to the PA Dept of Treasury as unclaimed property.  Pennsylvania law does not distinguish between paper and non-paper gift cards/certificates.  A summary of state law on gift cards can be found here https://www.patreasury.gov/assets/pdf/UnclaimedProperty-Gift-Card-FAQs.pdf  

 Gift card promotions can be successful, but news media companies and their advertisers must be aware of and comply with applicable state and federal laws governing gift cards. PNA recommends that members seek legal advice before implementing a promotion that uses gift card or gift certificates as an incentive.

As always, this is not intended to be, nor should it be construed as, legal advice. Please contact your attorney or the Legal Hotline at (717) 703-3080 with questions.

 

 

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