• States Consider Action on Gift Card Laws
  • March 10, 2010
  • Law Firm: Manatt, Phelps & Phillips, LLP - Los Angeles Office
  • More than 20 states are currently considering legislation on gift cards and gift certificates, with proposals ranging from laws on unclaimed funds and abandoned property to laws addressing loyalty programs and expiration dates.

    Some of the states’ proposals are an attempt to align their laws with the gift card provisions of the federal Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009, which established disclosure requirements and set limits on dormancy and service fees. Others, however, go further - Missouri, New Jersey, and Virginia are all considering laws that would prohibit the use of expiration dates or service fees for gift cards in those states.

    Below is a summary of some of the proposed state laws.

    • California

    On January 19, the California Senate was presented with SB885, a bill on gift certificate redemption. The proposed legislation would require that a gift certificate with a specified amount be redeemable for its cash value, and that the gift certificate contain a statement to that effect. The bill would also do away with several exceptions in the existing statute that prohibit the sale of a gift certificate containing a dormancy fee.

    • Illinois

    In Illinois, HB4702 was referred to the House Rules Committee in early January. The bill would amend the state’s Consumer Fraud and Deceptive Business Practice Act to provide that the holder of a gift certificate issued on or after January 1, 2011, that has a balance of less than $10, must be given the option of receiving that balance in cash.

    • Nebraska

    The Nebraska legislature is considering a bill addressing customer loyalty or incentive programs. Pursuant to LB720, if a retail business establishes a customer loyalty, bonus, or incentive program that provides a general-use prepaid card, the business would also be required to offer the incentive in the form of cash or a negotiable check. In addition, the prepaid card would not expire for a specific time and its value could not be decreased for administrative, shipping, or handling fees.

    • New Jersey

    New Jersey is considering several pieces of legislation regarding gift cards, including A638, a bill that would prohibit the display of gift card account numbers and make it illegal to sell a gift card unless it is packaged or displayed so that the card number cannot be viewed prior to purchase. The state is also considering A1635, a bill that would create an exception for prepaid bank cards that disclose their expiration dates and dormancy fees from the statute regulating gift cards.

    Why it matters: The recent enactment of the CARD Act has not deterred states from considering their own gift card laws. While some of the statutes would harmonize individual states’ laws with federal law, others are continuing to chart their own course, sometimes with greater limitations and restrictions. Companies need to be aware that several states are considering action and that Congress is also considering an amendment to the CARD Act, H.R. 3639, which would establish an earlier effective date for gift card provisions.