Consumers now have more protections with gift cards

Gift cards have become very popular in the past several years. These cards allow the recipient to “get what he or she really wants.” Universal or “general use prepaid” gift cards are the most frequently purchased gift cards and allow the recipients to go just about anywhere they want to make their purchase including retailers and restaurants. Examples include mall gift cards contained on a plastic card or other electronic payment device and redeemable at the unaffiliated stores throughout the mall.

New federal rules for gift cards, the Credit Card Accountability, Responsibility and Disclosure Act of 2009 or the “CARD Act,” mean you have longer to use the gift cards and don’t face as many costs up front. The federal rule changed use time so that now, instead of the usual one year card life, you have up to five years to spend your balance on most cards. Also, card issuers must now wait a year before charging an inactive fee. While this may drive the fees higher to make up the difference, if the card is used within the first year, there would be no chance of any fees being charged for inactivity.

In North Dakota, there is a law that addresses gift certificates/cards as well. This law states that the recipient of a gift certificate/card to be used at a specific store may not be charged additional monthly or annual service or maintenance fees. The time for redemption on the gift certificate/card may not be limited to a date before six years after the date of purchase, one year longer than the federal rules mandate. The gift certificate/card may not contain any statement suggesting that any different expiration date or redemption date apply to the gift certificate/card. “General use prepaid cards” are not subject to these restrictions.

As for the amount of fees charged on the gift cards, there is no limit on the monthly fee issuers can charge after the first year, and they are not restricted from charging you a fee when you initially purchase the card. They may also charge a fee to replace a card if it is lost or stolen.

Not covered in the new federal rules are the reloadable prepaid cards when they carry logos for MasterCard, Visa, American Express, and other lenders. When these cards are used like debit cards and reloaded by an employer, for instance, they are not covered.

North Dakota law provides that expiration dates and service fee provisions do not apply to gift certificates distributed to a consumer pursuant to an awards, loyalty, or promotional program without money or other thing of value being given in exchange for the gift certificates by the consumer. Any restriction or limitation on this the promotional gift certificate must be disclosed to the consumer, in writing, at the time the gift certificated is given to the consumer.

While gift cards can be the easy gift to buy for someone who has everything, they are not without problems. If a company goes out of business, or files for Chapter 11 bankruptcy, what will be the status of the outstanding gift cards? In many cases, the holders of the gift cards will not receive anything and the giver will be out the money. The gift card will hold no value. If you do give or receive a gift card this year, it should be spent within a reasonable period of time.

North Dakota state law regarding gift cards/certificates is already in effect. The federal rule went into effect on Aug. 22, 2010, but businesses have until Jan. 31, 2011, to print expiration dates, inactivity fees and other restrictions on their cards.

The Attorney General’s Consumer Protection Division investigates allegations of fraud in the marketplace. Investigators also mediate individual complaints against businesses. If you have a consumer problem or question, call the Consumer Protection Division at 328-3404, toll-free at 1-800-472-2600, or 1-800-366-6888 (w/TTY). This article and other consumer information is located on the website at www.ag.nd. gov.

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