New Gift Card Law Needs Tweeking

The CARD Act went into effect in February and was designed to protect consumers from egregious practices by gift card issuers, such as early expiration dates and "dormancy" fees.

The new rules takes effect in August, 2010 and are great for consumers, requiring more disclosure about fees and expiration dates, but there remain plenty of loopholes for card-issuers.

For instance, the new rules don’t adopt several provisions requested by a coalition of consumer groups, including Consumers Union, publisher of Consumer Reports. Among them are a caps on fees, a strict prohibition on card-expiration dates shorter than five years, and a requirement that issuers provide one free replacement of a lost or stolen card.

Although it's great to have new laws that protect consumers using gift cards, there are tweeks that need to be set into place. For instance, currently restrictions on fees and expiration dates don’t apply to cards issued as part of loyalty, award, or promotional programs, or to “reloadable” cards not labeled or marketed as a “gift card” or “gift certificate.”

Another drawback is that these new rules don’t protect consumers if an issuer files for bankruptcy protection or goes out of business.

In conclusion, although we in the gift card industry are happy about these new rules, we hope that before they go into place there will be several major adjustments.