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New York and Rhode Island Amend Gift Certificate/Gift Card Laws

New York and Rhode Island recently enacted bills that amend the states’ existing gift certificate/gift card statutes. The New York amendments will take effect October 20, 2004, and the Rhode Island amendments took effect on July 9, 2004 when the bills were enacted.

New York

Senate Bill 6611 and Senate Bill 6612 amend the definition of gift certificate to include gift cards, restrict dormancy and service fees, and require new disclosures regarding certificate terms and conditions, including expiration dates and fees.

Beginning October 20, 2004, the terms and conditions of a gift certificate must be disclosed to the purchaser either on a conspicuously located sign or contained in an offer made by mail, and must be conspicuously disclosed on the gift certificate or an envelope or packaging containing the gift certificate or on an additional printed document. If the terms and conditions are printed on the envelope or packaging of the gift certificate or an additional printed document, the gift certificate itself must also contain a toll-free telephone number where consumers can obtain the terms and conditions.

The terms and conditions must include the expiration date, whether any fees are assessed against the balance of the gift certificate, and whether a fee will be charged for the certificate’s replacement. Certain disclosures must also be made in offers and advertising when a gift certificate is sold over the telephone or online.

In addition, no monthly service fee may be assessed against a gift certificate before the thirteenth month of inactivity.

The legislation provides exemptions from these requirements, including gift certificates issued to a consumer or employee as part of an awards, rewards, loyalty or promotional program, or given to nonprofit organizations for fundraising purposes.

Under the amendment, unclaimed funds related to gift certificates are subject to the state’s abandoned property law.

Rhode Island

Senate Bill 2407 (enacted with its companion bill House Bill 7424) prohibits expiration dates and service and maintenance fees. The bill defines gift certificate to include gift cards, including stored-value cards. Rhode Island’s existing gift certificate law also requires gift certificate issuers to maintain records of gift certificate purchases, a requirement which remains unchanged. The record must include the date of sale, the full value of the certificate, the identification number assigned by the issuer to the certificate, and the state in which the sale of the certificate took place. The issuer must also provide a written and numbered receipt to a consumer who purchases a gift certificate exceeding fifty dollars. Additionally, unredeemed gift certificates shall not escheat to the state.

The legislation provides an exemption for “general use prepaid cards issued by a third party prepaid card issuer” and for gift certificates issued to a consumer pursuant to an awards, loyalty or promotional program.

With the passage of these laws, New York and Rhode Island join Hawaii, Illinois, Louisiana, South Carolina and Washington in enacting legislation this year to restrict, prohibit or impose disclosure requirements regarding expiration dates and/or fees.

This report is a publication of Loeb & Loeb and is intended to provide information on recent legal developments. This report 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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