February 6, 2020:Yay! Gift card to my favorite store, “Rad Stuff, Ltd.” OMG, thank you for the best birthday present ever! I can’t wait to go there!
February 7, 2021:
Oh, yeah I got a gift card to Rad for my birthday last year, I’m going to finally use it! Expires February 6, 2020? Ugh, that sucks. Oh well, guess I’ll toss it.
BUT WAIT!!!! The federal government is looking out for consumers!
Credit Card Accountability Responsibility and Disclosure Act
In 2009, Obama signed the Credit Card Accountability Responsibility and Disclosure Act or (“CARD Act”) into action. CARD prohibits expiration dates less than 5 years from the date of issuance, or the date last loaded with money for gift cards written out for a specified amount. So, this would apply to any gift cards to a business, such as Rad that, are authorized for a specified dollar amount. For example, let’s say a consumer decides to purchase a gift card for $80. That $80 gift card cannot have an expiration date of less than 5 years from the date of purchase. Under this scenario, the receiver of the $80 gift card may use the gift card like cash and purchase anything she wants – candles, books, a sweater, whatever the store sells. An easier way to think about this is, if the gift card can be used like cash at the store, it cannot expire in less than 5 years.
What kinds of gift cards can expire under the CARD Act?
Note, that several types of “gift cards” are excluded:
- Those used for telephone service, only
- Reloadable cards not marketed or labeled as a gift card or gift certificate (such as those that are at the check-out line of a large retailer), when certain other stringent rules are also followed
- Loyalty, award and promotional gift cards
- Cards not marketed to the general public such as cards for store credit issued directly to a specific consumer
- Cards/certificates issued in paper form, only. Some small businesses may issue gift certificates in paper form only, and in that situation, the business could put an expiration date for less than five years. This exclusion would not apply if a bar code or certificate number was also provided electronically to the consumer, and can be reproduced in paper form
- Cards redeemable for a specific event or venue that do not state a monetary value
Can Gift Cards for Services Expire?
What about packages of services, say for a package of massages?
Packages of services are not subject to the “gift card” rule under the CARD Act because the package is not issued to the client in a specified amount to be used for any number of things in the future. Rather, the consumer is paying a certain amount of money ahead of time for services in the future. In other words, the package is not like cash; it is more akin to paying for something specific up front, and having a certain amount of time to pick it up. Also, the rule was not intended to cover certain services such as spa treatments, and massage could reasonably be interpreted as a spa treatment.
Questions about Issuing Gift Cards as a Business?
For more questions regarding properly issuing and using gift certificates and cards, contact Attorney Leslie Elkins.