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Fed Issues New Gift Card Rules
Volume 698
March 25, 2010

On Tuesday, the Federal Reserve issued new rules that restrict the fees and expiration dates that may apply to gift cards. The new guidelines, which go into effect on August 22, ban gift card issuers from charging dormancy, inactivity and service fees on any gift card within a year of purchase. Separately, the Federal Reserve’s new gift card rules mandate that card companies can only tack on one fee per month after the first year of a card’s lifetime, and these charges have to be clearly disclosed to purchasers and users.

“Concerns have been raised regarding the amount of fees associated with gift cards, the expiration dates of gift cards, and the adequacy of disclosures,” the Federal Reserve said in a statement. “Consumers who do not use the value of the card within a short period of time may be surprised to find that the card has expired or that service fees have reduced the value of the card.”

Under the new rules governing sales of gift cards, three conditions must be met before issuers can charge inactivity or service fees. Fees can be applied only if the consumer hasn’t used the card within a one-year period, if there’s no more than one fee charged per month and if consumers are made aware of such fees beforehand. “These new rules will curb the abusive fees and early expiration dates that can drain gift cards of their value before they are even used,” said Senator Charles Schumer (D-NY).

The Fed’s new guidelines cover retail gift cards and network-branded gift cards, which are redeemable at any merchant that accepts the card – such as American Express and Visa gift cards.

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