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Gift Certificates, Telemarketing and Privacy Policies Update

Washington State Enacts New Gift Certificate Law

On March 26, Washington state Governor Gary Locke signed into law H.B. 3036 which bans expiration dates and service or dormancy fees on gift certificates and gift cards, with limited exceptions, and makes the gift certificates and cards that are subject to these new prohibitions exempt from the unclaimed property statute.  Specifically, expiration dates are prohibited except when a gift certificate or gift card is donated to a charitable organization for use in the charity's fundraising purposes; is redeemable for goods or services provided in the state by artistic or cultural organizations; or is issued without consideration as part of a loyalty or awards program.  It is important to note, however, that if the certificate "is issued with the sale of tangible personal property or services," it is subject to the prohibition on expiration dates and services and dormancy fees.  Where permitted, the expiration date must be disclosed clearly and legibly.

Service and dormancy fees are not allowed unless all of the following are true:

  • the amount remaining is $5 or less;
  • there is a disclosure explaining the amount of the charge, how often it is applied, and that it is triggered by inactivity;
  • the charge does not exceed $1 per month;
  • the charge is assessed only after 24 consecutive months of inactivity;
  • the bearer can add value to the gift certificate or card; and
  • if a fee is assessed, the remaining value can be redeemed in cash on demand.

The new law does not apply to gift certificates or gift cards issued by financial institutions or their subsidiaries that are usable with multiple unaffiliated sellers.  The law takes effect June 10, 2004, for gift certificates or gift cards issued on or after July 1, 2004.

Telemarketers Must “Scrub” Their Lists Against National Do Not Call List Every 31 Days

The Federal Trade Commission announced that it has modified the rules implementing the Telemarketing Sale Rules to require telemarketers and sellers that are subject to the national Do Not Call registry to scrub their lists against the registry every 31 days, instead of quarterly.This change will take effect January 1, 2005.

Companies May Need to Revise Privacy Policies to Comply with New California Law

California enacted the Online Privacy Protection Act which takes effect July 1, 2004.Operators of commercial web sites or online services that collect personal information from California residents through the Internet must conspicuously post their privacy policy on their web site.

The required privacy policy must:

  1. Identify the categories of personally identifiable information that the operator collects through the web site or online service and the categories of third-party persons or entities with whom the operator may share personally identifiable information.
  2. Describe how a consumer can review and make changes to his or her personal information, if the operator allows such review and changes.
  3. Describe how consumers can learn of changes in the operator’s privacy policy.Whether an operator affirmatively notifies consumers of changes in its privacy policy, by email for example, or states that consumers should return to the web site often to see if its privacy policy has changed, the operator must disclose how consumers can learn of changes in the privacy policy.
  4. Identify the effective date of the privacy policy.

The California Attorney General, local district attorneys, and private individuals can bring suit under California’s Unfair Competition Act to enforce the provisions of this new law.The Act provides for penalties of $2,500 per violation.

Entities that operate web sites or online services should review their offline and online privacy policies to ensure compliance with the California law.

This client alert is a publication of Loeb & Loeb and is intended to provide information on recent legal developments. This client alert does not create or continue an attorney client relationship nor should it be construed as legal advice or an opinion on specific situations.

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