What to consider regarding new gift card legislation

Just in time for the holidays, new legislation regarding gift cards goes into effect in New York state on Dec. 10.

The legislation relates to fees for gift cards and gift certificates, and limits the amount a merchant may charge for a gift card. It also prohibits the expiration of gift cards or certificates, with the exception of promotional gift certificates, in which the certificates may not expire earlier than nine years after the date they were issued.

Genevieve Caputo, New York Credit Union Association director of compliance, provides key takeaways of which credit unions should be aware:

The terms “gift certificate” and “gift cards” are used interchangeably throughout the bill. “Gift certificate” means “a certificate, electronic card, or other pre-funded record” that is the following:

  • usable at a single merchant or an affiliated group of merchants that share the same name, mark, or logo, or is usable at multiple, unaffiliated merchants or service providers;
  • issued in a specified amount;
  • may or may not be increased in value or preloaded;
  • is purchased and/or loaded on a prepaid basis for the future purchase or delivery of any goods or services; and
  • is honored upon presentation.

The type of gift cards that are sold by most credit unions are considered “open loop gift certificates (cards)” under this bill, because they are not limited to one store location.

Reloadable gift cards are included in this bill unless they are linked to a deposit account.

A one-time fee may be assessed on open loop gift cards, however no monthly fee, redemption fee, or service fees may be assessed against the balance of a gift certificate prior to the 25th month of dormancy. Dormancy fees may apply at the 25th month of no activity on an open loop gift card, but must be waived if the purchaser comes in prior to three years of the issuance.

Gift cards cannot expire prior to nine years. Terms and conditions (including expiration dates) must be clearly and conspicuous located on the gift card at issuance. Additional terms and conditions including, but not limited to, policies related to refunds, warranties, changes in terms and conditions, the procedure for the replacement of a gift certificate, and if any, assignment and waiver must be conspicuously printed:

  • on the gift certificate;
  • on an envelope or packaging containing the gift certificate (provided that a toll -free telephone number to access the additional terms and conditions is printed on the gift certificate); or
  • on an accompanying document (also provided that a toll -free telephone number to access the additional terms and conditions is printed on the gift certificate.

Additional details about the legislation were also posted to the Compliance ListServ by Caputo on Dec. 1.

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