Four States Enact New Gift Card Laws
Arizona, Maryland, Oklahoma and Texas recently enacted laws regulating gift certificates and gift cards, joining 17 other states with laws regulating gift certificates and gift cards. The key provisions of these new laws are outlined below. Please contact us with any additional questions.
Arizona Senate Bill 1299 takes effect October 31, 2005. The law requires that a gift card that is subject to an expiration date or any fee clearly and conspicuously disclose the expiration date, the amount of the fee and when it is incurred. Such disclosure must be clearly visible to a consumer before a purchase is made: for a paper gift certificate, the disclosure(s) must be made on the front of the certificate; for telephone sales of gift cards, the disclosure(s) must be made verbally before purchase; and for online purchases, the disclosure(s) must be made online before purchase.
The disclosure requirements do not apply to (1) gift cards that are distributed pursuant to an awards, loyalty or promotional program when no money or other thing of value is given, (2) cards that are sold below face value or donated to a non-profit organization for fundraising purposes, or (3) a card for prepaid telecommunication services, a debit card connected to a person's bank account or an electronic funds transfer card. The act defines gift cards as any gift certificate, gift card or electronic gift card or any other medium issued or sold after October 31, 2005, for which the issuer has received payment for the full face value or full banked dollar value of the card for the future purchase or delivery of goods or services.
Maryland Senate Bill 8 takes effect July 1, 2006. The new law prohibits issuing a gift card that is subject to an expiration date or any fees within 4 years of the date of issuance. In addition, expiration dates and fees that take effect more than 4 years after the date of purchase must be disclosed in at least 10 point font on the front or back of the card, on a sticker permanently affixed to the card, or on an envelope containing the card. A term or condition disclosed to the consumer may not be changed after the date of purchase or issuance, unless such change benefits the holder of the card. A gift card that is sold or issued in violation of this section will be valid but will not be subject to an expiration date or any fees.
These requirements and prohibitions do not apply to (1) gift cards that are distributed under an awards, loyalty or promotional program if the recipient does not give any money or value to receive the gift card, (2) prepaid telephone calling cards, or (3) gift cards that are processed through a national credit or debit card service and may be used to purchase goods or services from multiple unaffiliated sellers. However, gift cards that are processed through a national credit or debit card service and can be used at multiple unaffiliated sellers may be subject to an expiration date and fees, but must contain specified disclosures in at least 10 point font. If these disclosures are hidden by the gift card packaging, the issuer of the card must provide a written statement of the disclosures before the card is sold or issued. For gift cards sold or issued by telephone or online, these disclosures must be made prior to purchase or issuance.
Oklahoma House Bill 1986, the Gift Certificate and Gift Card Disclosure Act, takes effect November 1, 2005. The law applies only to gift cards and gift certificates that are usable to purchase goods or services at a single merchant or at a group of merchants that are affiliated through common corporate ownership or control, and that are purchased on a prepaid basis in exchange for payment.
The law prohibits expiration dates less than 60 months from the date of purchase and prohibits service fees, unless certain very stringent specified conditions are met. The expiration date restriction does not apply to, among others, (1) gift cards issued pursuant to an awards, loyalty or promotional program when given without any consideration, and (2) gift cards that are sold below face value to employers or to non-profit organizations for fundraising purposes.
Texas Senate Bill 446 takes effect September 1, 2005. The law allows expiration dates and fees if conspicuously disclosed. Specifically, an issuer can impose a reasonable handling fee in connection with issuing or adding value to the card, a reasonable access fee for use at an ATM, and a reasonable reissue or replacement fee. An issuer can impose other fees as long as they are reasonable and do not begin until at least one year after the date of issue. All fees, expiration dates and any other material term or restriction must be clearly and conspicuously disclosed at the time the card is issued or sold. An expiration date and any fees that periodically reduce the amount of the card must be legibly printed on the card.
The disclosure requirements do not apply to, among others, (1) gift cards issued under an awards, rewards, loyalty, incentive, rebate or promotional program when no money or consideration is given; (2) gift cards donated or sold below face value to the issuer's employees, to a non-profit organization, or to an educational institution for fundraising purposes; (3) gift cards that do not contain an expiration date or fee not specifically permitted by the statute; and (4) gift cards issued by a federally insured financial institution for which the financial institution is primarily liable as the issuing principal.
Correction: The Georgia Slam Spam E-mail Act takes effect July 1, 2005, and not April 19, 2005, as we reported in the May 2005 alert.
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