New Gift Card Rules Will Make That Plastic Even More Of A Hot Potato

Written by Evan Schuman
August 25th, 2010

When the U.S. Federal Reserve’s new gift card rules took effect on Sunday (Aug. 22), it made severe changes to when gift cards can expire and even more severe changes to when the money on those cards can expire. These changes could prove problematic for retailers who have stockpiles of cards with the old wording. But those headaches are trivial compared to what their IT counterparts, who need to incorporate the new accounting rules for existing and new gift card accounts, will face.

The new rules apply to activity as of Sunday, which means that the millions of cards already in circulation must be handled differently until they’re all gone.

The new rules are fairly straightforward:

  • Expiration Date Limits
    The money on a gift card must be good for at least five years from the date the card is purchased, and any money that might be added to the card at a later date must also be good for at least five years.
  • Replacement Cards
    From the Fed’s site for consumers: “If your gift card has an expiration date, you still may be able to use unspent money that is left on the card after the card expires. For example, the card may expire in five years but the money may not expire for seven. If your card expires and there is unspent money, you can request a replacement card at no charge.” (We assume they mean that the replacement card will be provided at no charge, rather than not charging for making the request. That said, charging for consumers making the request would be nice.)

The rules also place new limits on fees. Overall, though, these changes will make it even more critical for programs to encourage these cards to be used–and used quickly–whether by the recipient or somebody else. Gift card exchange sites, which theoretically can get unwanted cards into the hands of those who will use them, might get a boost from the rules, especially those that try sharing more CRM data.

One of the longstanding frustrations with gift cards is that retailers have little insights into who receives them, making marketing next to impossible. Some gift card exchange sites have experimented with offering this kind of CRM data to retailers. Unfortunately, the site pushing the data exchange most aggressively–Leverage–seems to no longer have a functional Web site. Hopefully, this was one of those “it was the execution and not the idea” situations.


2 Comments | Read New Gift Card Rules Will Make That Plastic Even More Of A Hot Potato

  1. Angela Says:

    Don’t destroy your non-compliant gift cards just yet! Congress and the President have passed H.R. 5502, the ECO-Gift CARD Act. The Act postpones the effective date of certain gift card provisions from August 22, 2010 to January 31, 2011. The bill provides additional time for gift card issuers and retailers to sell or dispose of existing gift cards produced prior to April 1, 2010 which do not meet the marking or disclosure of the new gift card regulations.

    To be eligible for the extension, companies must agree to eliminate the cards’ expiration date and consumers would be entitled to receive a free replacement card or certificate when there are funds remaining.

    During the transition period and beyond, card issuers must notify consumers of their rights through in-store signage, messages during customer service calls, Web sites, and general advertising, that –

    Any such certificate or card for which funds expire shall be deemed to have no expiration date with respect to the underlying funds;

    Consumers holding such certificate or card shall have a right to a free replacement certificate or card that includes the packaging and materials, typically associated with such a certificate or card; and
    Any dormancy fee, inactivity fee, or service fee for such certificates or cards that might otherwise be charged shall not be charged if such fees do not comply with section 915 of the Electronic Funds Transfer Act.

    The ECO-Gift CARD Act makes no change to the CARD Act rules, it simply keeps gift cards on the shelves for consumers this holiday season by not requiring the destruction and replacement of existing gift card inventory.

    Cards produced after April 1, 2010 must comply with The CARD Act.

  2. Ray Says:

    Great info Angela! Few of the published reports mention the ECO-Gift CARD Act and a lot of merchants are confused about the deadlines and the eligibility requirements. The good news is that the ECO-Gift CARD Act is only 2 pages long and fairly easy to understand for us regular, non-lawyer types. Anyone can download it by doing a search for HR5502 at the web site.


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