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Kentucky, Nebraska and Ohio recently enacted new state laws regulating gift certificates and gift cards, continuing a growing trend to prohibit, restrict or otherwise limit expiration dates and fees. The key provisions of these new laws are outlined below. Please contact us with any additional questions.
Kentucky Senate Bill 49 takes effect on or about July 11, 2006. The new law prohibits issuing gift cards for payment with an expiration date of less than one year from the date the gift card was issued. In addition, the law prohibits a gift card issuer from charging or deducting any fees that reduce the value of the card prior to the expiration date on the card.
The statutory definition of gift card specifically exempts prepaid telephone calling cards and prepaid cards issued by a bank or other financial institution usable at multiple, unaffiliated merchants or ATMs, which are not subject to the new limitations. Promotional gift cards issued by merchants without payment are also excluded. In addition, promotional gift cards distributed to consumers without consideration are exempt from the expiration date restriction so long as the expiration date on the promotional gift card is no less than 120 days from issuance.
If a gift card is sold without an expiration date printed on the front or back of the card, it is valid until redeemed or replaced with a new gift card.
Nebraska Legislative Bill 173, which amends the Uniform Disposition of Unclaimed Property Act with respect to gift certificates and gift cards, takes effect November 2, 2006. The amended section provides that a gift card or gift certificate with a face value of less than $100 and without fees or expiration dates is not presumed abandoned (and, therefore, not subject to escheat) if it is not used prior to the statutory abandonment period of three years. Gift certificates or gift cards with a face value of $100 or more and any gift certificate or gift card with an expiration date or fee will be presumed abandoned after three years. There are special provisions with respect to the treatment of gift certificates and gift cards issued prior to November 2, 2006.
In addition, any gift certificate or gift card subject to a fee or an expiration date shall contain a clear and conspicuous notice on the card or certificate where it is visible to a purchaser prior to the purchase.
The statutory restrictions regarding expiration dates and fees do not apply to general-use prepaid cards usable with multiple, unaffiliated sellers of goods or services; however, general-use prepaid cards are presumed abandoned after 5 years from the last transaction.
Ohio Senate Bill 33 takes effect June 14, 2006. The law prohibits the sale of gift cards with an expiration date less than two years after the date the gift card is issued, and prohibits the imposition of service charges or fees that reduce the value of the card during those two years. The statute exempts gift cards issued pursuant to loyalty or promotional programs without charge, as well as those usable with multiple, unaffiliated sellers of goods or services. The statutory definition of gift card specifically exempts prepaid calling cards used to make telephone calls.
In addition, all gift cards sold without an expiration date are valid until redeemed or replaced with a new gift card.
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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