Sign Up for Alerts
Sign up to receive receive industry-specific emails from our legal team.
Sign Up for Alerts
We provide tailored, industry-specific legal updates to our clients and other friends of the firm.
Areas of Interest
September 15th, 2010
Federal Gift Card Law Prompts Change in State Law
In July, Hawaii became the first state to conform substantial aspects of its gift card law with the new federal gift card law contained in the "Credit Card Accountability, Responsibility, and Disclosure Act" of 2009 (the "CARD Act"). Here is a summary of Hawaii's changes, and a brief look at the gift card legal landscape.
The federal law, which became effective August 22, 2010, regulates gift certificates, store gift cards, and general-use prepaid cards. Under the CARD Act:
- gift cards must remain valid for at least five years;
- fees may not be imposed unless there has been no activity for at least a twelve-month period prior to the imposition of the fee;
- only one fee may be charged per month; and
- permitted fees and expiration dates, along with other information, must be clearly and conspicuously disclosed.
The CARD Act contains certain exemptions, notably for paper gift certificates, promotional gift cards, cards for event or venue admission and reloadable cards that are not labeled or marketed for gift-giving purposes.
Like the federal law, Hawaii’s amended law lengthens the period during which gift certificates must be valid from two to five years if the certificate is in the form of an electronic card with a banked dollar value. Paper certificates may still expire after two years. The law also caps activation or issuance fees to the lesser of 10% of the face value of the card or $5. But the law’s prohibition against service, inactivity or dormancy fees remains unchanged. The amended Hawaii law also includes many of the same exemptions contained in the federal CARD Act.
It is important to note that the requirements in many states for gift cards are stricter than those imposed by the CARD Act and that the CARD Act does not preempt stricter state laws. For example, Massachusetts requires gift cards to be valid for at least 7 years after date of issuance and some other states prohibit expiration dates entirely. Additionally, a handful of states require that a gift card with a certain balance be redeemable for cash at the request of the bearer. And, under a New York law taking effect on January 1, 2011, businesses offering rebates in the form of gift cards must clearly disclose in all advertising that the rebate will be provided in the form of a gift card rather than cash or check.
Summary
We will continue to monitor how the different state gift card laws conform with (and diverge from) the CARD Act. For now, issuers must adapt their gift card policies and practices to comply with requirements that are more stringent than those in the CARD Act if selling to consumers in states with stricter rules.
If you have any questions regarding this gift card law or any other advertising/marketing law issues, please contact Terri Seligman at tseligman@fkks.com or (212) 826 5580, or any member of the Frankfurt Kurnit Advertising Group.
Disclaimer. This alert provides general coverage of its subject area. We provide it with the understanding that Frankfurt Kurnit Klein & Selz is not engaged herein in rendering legal advice, and shall not be liable for any damages resulting from any error, inaccuracy, or omission. Our attorneys practice law only in jurisdictions in which they are properly authorized to do so. We do not seek to represent clients in other jurisdictions.
Other Advertising Law Alerts
What the Advertising Industry Can Learn from Kim Kardashian’s Settlement with the SEC
On October 3, 2022, the Securities and Exchange Commission (SEC) announced that it entered into a $1.26 million settlement with Kim Kardashian over her social media promotion of the EMAX token without disclosing payment she received from token issuer, EthereumMax. The matter provides important lessons for advertisers. Read more.
October 10 2022
Get Ready for California’s New “Automatic Renewal” Rules
California recently amended its Automatic Purchase Renewals law. The amended statute - effective July 1st -- require marketers to provide consumers of automatic renewal or continuous service offers with more information and easier ways to terminate. Read more.
June 22 2018
“Made in the U.S.A.” Claims Continue to be Scrutinized
In 2016, California amended Section 17533.7 of the California Business and Professions Code ("Section 17533"), liberalizing the standard for selling products labeled "Made in U.S.A" to California consumers. Read more.
June 4 2018