In the wake of the COVID-19 pandemic, many small businesses and restaurants have been forced to close or to provide only limited services to customers. To ensure a sustained income stream, some businesses have been emphasizing the sale of gift cards or gift certificates—and the media have been encouraging consumers to support their favorites by pitching gift cards as the “war bonds” of the coronavirus pandemic. But while buying and selling gift cards can be a win-win for both consumers and the businesses issuing them, gift card issuers must remember to comply with federal and state gift card laws that impose restrictions on expiration dates and fees, require specific disclosures, and impose other regulatory requirements. With the upsurge in gift card activity, it’s a good time to review these laws and restrictions to ensure one does not end up as the target of a Federal Trade Commission or state attorney general inquiry or an expensive class action lawsuit.
Federal Regulation of Gift Cards
The Credit Card Accountability Responsibility and Disclosure Act (“CARD Act”) was signed into law on May 22, 2009. Although the name suggests this law pertains only to credit cards, it also applies to gift cards, stored value cards, and general-use prepaid cards that are sold or issued primarily for personal, family, or household use. Section 401 of the CARD Act requires specific disclosures regarding expiration dates and fees, limits dormancy, inactivity, and service fees, and establishes a minimum expiration date for these cards.