Centers of Excellence: Gift cards
- The Maine Predatory Marketing To Minors legislation, passed last year and then called “unconstitutional” by the Maine Attorney General, in response to a coalition effort in which PMA played a role, is now the subject of a new bill. This new bill would repeal the original and enact a radically reshaped one, restricted its scope to pharmaceutical marketing to minors.
- Several FTC and FTC initiatives/workshops and the like are focusing on marketing to children, food standards and empowering parents to control what content is presented on TV and the internet. It appears there is a joint effort of both agencies to treat minors , even beyond COPPA, as a specially protected class with respect to advertising
- A new proposed federal regulation under the Credit Card Act of 2009 clarifies rules concerning expiration dates and dormancy charges of gift cards.
- New state legislation is aimed at Advance Consent Marketing,including in Kentucky, Maine and New Hampshire. These are, in the judgment of some, part of efforts for greater transparency in dealing with consumers, but also have the effect of making sales, even with legal disclosure, harder to close.
The Credit Card Act of 2009 was passed on May 22, which provides federal regulations for gift cards. The law specifically regulates general use prepaid cards, gift certificates and store gift cards. The law excludes: (a) cards that are re-loadable and not marketed or labeled as a “gift card” or “gift certificate”, (b) loyalty awards or promotional gift cards (which is yet to be defined by the Federal Reserve), (c) cards not marketed to the general public, and (d) cards issued in paper form only. The law prohibits expiration dates on gift cards that are less than five (5) years from the date on which the gift card was issued or the funds were last loaded to the card. The law requires the terms of expiration to be clearly and conspicuously stated.
The law permits dormancy, inactivity and service fees on gift cards only if
(a) there has been no activity on the card in the 12 month period prior to which the charge is imposed,
(b) not more than one (1) fee is charged in any month, and
(c) disclosure requirements are met.
The disclosure requirements are that the card must clearly and conspicuously state that a fee may be charged, the amount of such fee, how often the fee may be charged and that the fee will be charged for inactivity. Notably, the fee must be disclosed to consumers before the card is purchased, regardless of whether the card is purchased in person, over the Internet or by telephone.
The law will become effective 15 months after it is signed by the President. The law does not preempt state laws that are more restrictive than this law.
These materials have been prepared by Winston & Strawn for informational purposes only. These materials do not constitute legal advice and cannot be relied upon by any taxpayer for the purpose of avoiding penalties imposed under the Internal Revenue Code.