This is an update to an earlier post regarding the Federal Reserve Board’s final rules implementing the gift card provisions of the Credit Card Accountability Responsibility and Disclosure Act of 2009 (“CARD Act”). On July 27, 2010, H.R. 5502 was signed into law, extending the effective date of disclosure requirements under the CARD Act from August 22, 2010 to January 31, 2011, for qualifying gift cards produced prior to April 1, 2010. You may recall that the rules restrict fees and expiration dates on various types of gift certificates and cards, and require sellers and issuers to make specific disclosures.
Gift Certificates, Store Gift Cards, and General-Use Prepaid Cards
Generally, the rules restrict fees, expiration dates, and impose certain disclosure requirements for (A) gift certificates, (B) store gift cards, and (C) general-use prepaid cards, as these terms (collectively, “gift cards”) are defined in the CARD Act.
Definitions
(A) Gift Certificates – are defined in the CARD Act as a card, code, or other device that is: (i) redeemable at a single merchant or an affiliated group of merchants that share the same name, mark, or logo; (ii) issued in a specified amount that may not be increased or reloaded; (iii) purchased on a prepaid basis in exchange for payment; and (iv) honored upon presentation by such single merchant or affiliated group of merchants for goods or services.
(B) Store Gift Cards – these types of cards are commonly known as “closed-loop cards”, and are essentially the same as Gift Certificates, but are reloadable or may be increased in value. The CARD Act specifically defines these cards as electronic promises, plastic cards, or other payment codes or devices that are: (i) redeemable at a single merchant or an affiliated group of merchants that share the same name, mark, or logo; (ii) issued in a specified amount, whether or not that amount may be increased in value or reloaded at the request of the holder; (iii) purchased on a prepaid basis in exchange for payment; and (iv) honored upon presentation by such single merchant or affiliated group of merchants for goods or services.
(C) General-Use Prepaid Cards – commonly referred to as “open-loop cards”, are defined in the CARD Act as cards or other payment codes or devices issued by any person that are: (i) redeemable at multiple, unaffiliated merchants or service providers, or automated teller machines; (ii) issued in a requested amount, whether or not that amount may, at the option of the issuer, be increased in value or reloaded if requested by the holder; (iii) purchased or loaded on a prepaid basis; and (iv) honored, upon presentation, by merchants for goods or services or at automated teller machines.