Gift Cards Deal With Discounts & Charity; Chart Updated

This post was written by Keri S. Bruce and Joseph I. Rosenbaum.

If you have been coming back to Legal Bytes to keep up with this and other developments in the law of Advertising Technology & Media ("ATM"), you know that we have been following the world of gift cards for many years (e.g., Gift Card Issuers Fight & Switch, Gift Cards in New Jersey: It’s Complicated!, Federal Reserve Board Has a Free Gift (Card) For You, Credit Card Act of 2009: Act I, Scene 1, Gift Cards in the Legal Limelight, Gift Cards: The Updated Chart is Still Free). If you are a regular Legal Bytes reader, you also probably know that we published and routinely update our U.S. Gift Card Statutory Chart – a reference tool you will certainly find helpful, although not a substitute for experienced legal counsel. In addition to the amendments noted below, we have updated our U.S. Gift Card Statutory Chart and you can read or download the updated chart right here (U.S. Gift Card Statutory Chart) [PDF].

You will also appreciate that we advise clients in this area all the time, assisted by an able team of financial services regulatory specialists, and so it will come as no surprise that we are telling you about some changes to the law in Vermont and Rhode Island that apply to gift cards. The term "gift certificate" is often used in the law, but separate definitions make it clear that the law applies to cards or any similar instrument, regardless of the material (e.g., paper, plastic, beads).

In addition to the Federal Credit Card Act of 2009, many states have their own regulations of gift cards and gift certificates. While many states have carve-outs in their gift certificate laws for loyalty and reward cards, Vermont has gone a step further and embraced group coupon/discount providers by separately defining these cards and providing separate disclosures to benefit consumers. In light of popular group coupon/discount providers, new marketing efforts involving gift cards and the continued prevalence of class actions, such as In re Groupon Marketing and Sales Practices Litigation, where Groupon reached a nationwide class action litigation settlement over allegations it had illegal expiration dates and other provisions on its vouchers, it is even more important to stay on top of these ever-changing laws.

Effective as of May 18, 2012, amendments to the Vermont statutes (Vt. Stat. § 2701 et seq.) seek to address issues arising from popular group coupon/discount providers. The new amendments introduce definitions for "a loyalty, award, or promotional gift certificate," "paid value" and "promotional value," extend the expiration dates for the paid value of a gift certificate, and remove the specific exemption for food product gift certificates.

Under the amended law, a "loyalty, award, or promotional gift certificate" is defined as a gift certificate issued on a prepaid basis primarily for personal, family, or household purposes to a consumer in connection with a loyalty, award or promotional program, and that is redeemable upon presentation to one or more merchants for goods or services, or is usable at automated teller machines.

These definitions are important because, if defined as loyalty, award or promotional gift certificates, they can be exempt from the statute’s requirements on expiration dates and fees and some other restrictions that would otherwise apply, provided that certain requirements are met.

To qualify, these instruments must disclose, on the front of the certificate, that the certificate is issued for loyalty, award or promotional purposes, and the date of expiration for both the paid value and promotional value (if any). (More on that distinction in a moment.) On or along with the instrument, the consumer must be informed as to the amount and conditions under which fees may be imposed, and if a fee is assessed and on the instrument, a toll-free telephone number and, if one is maintained, a website a consumer may use to obtain fee information (disclosed on the certificate).

The Vermont amendment distinguishes between "paid" and "promotional" value. Paid value is the value of any money or other consideration given in exchange for the gift certificate. Promotional value means any value shown on a gift certificate in excess of the paid value. Example, a loyalty program buys 1 billion $25 gift cards and pays $19.99 each. The $19.99 is the paid value and the $5.01 is the promotional value. The statute prohibits the paid value from expiring for five years (extended from the previous three-year requirement), while the promotional value is exempt from the restrictions on expiration dates and fees.

Meanwhile, in Rhode Island, amendments – effective as of June 19, 2012 – to gift certificate provisions of the state’s Unfair Sales Practices law (R.I. Gen. Laws § 6-13-12) allow gift cards donated for fundraising purposes to expire, but only if the card clearly states that the instrument has been donated for charity and a clearly defined expiration date of not less than one year after the issuance, is disclosed to the recipient.

If you need help from lawyers who know this area and can provide experienced, practical counsel, contact Joseph I. ("Joe") Rosenbaum or Keri Bruce or your favorite Rimon lawyer, all of whom will be happy to help.

Gift Card Issuers Fight & Switch

Back in August 2010, Legal Bytes reported that a New Jersey law applicable to abandoned property (escheat) would effectively alter the tenor and scope of the New Jersey gift card law (see, Gift Cards in New Jersey: It’s Complicated!).

Well today, in an Associated Press article published by ABC News Internet Ventures. Yahoo! – ABC News Network, it is being reported that American Express, which was already pursuing its legal rights and remedies in a law suit filed to overturn the law, has now opted to pull gift cards from retail sale in New Jersey.

The new law would require sellers in New Jersey to capture the ZIP code of everyone who buys a gift card. Monies left on those gift cards bought in New Jersey that lie dormant and unused after two years would then ostensibly be required to escheat to the state. After the law was passed about two years ago, American Express (joining forces with the New Jersey Retail Merchants Association and others), filed suit challenging the new law. Initially, a U.S. District Court issued an injunction against implementing it, but more recently the injunction was removed – perhaps the stimulus for the reported move by American Express.

If you have been coming back to Legal Bytes to keep up with this and other developments in the law of Advertising Technology & Media (“ATM”), you know that Keri Bruce in Rimon’s ATM practice group previously posted a report entitled Gift Cards Tag Along with Credit Card Legislation, noting that federal legislative and regulatory requirements will soon apply to gift cards. You will also see links to a U.S. Gift Card Statutory Chart (Updated), which those of you who work with gift cards and similar financial payment instruments may find helpful; and you already know we follow and advise clients in this area all the time, assisted by a team of financial services regulatory specialists as well.

So if you need help from lawyers who know this area and can provide experienced, practical counsel, contact Joseph I. (“Joe”) Rosenbaum or Keri Bruce, or your favorite Rimon lawyer, all of whom will be happy to help.

Gift Cards: The Updated Chart is Still Free

Just more than a year ago, a Legal Bytes post entitled “Gift Cards: The Chart is Free. It’s Our Experience You Pay For.” gave our readers and visitors a handy chart that listed and briefly summarized the key legal requirements applicable to Gift Cards – those payment instruments that are increasingly blurred with prepaid debit cards, stored value cards, smart or chip-cards, reward cards, discount certificates, and traditional credit, charge and debit cards. Now those of you with gift card programs – or who are thinking about gift card programs – already know there are various state laws and regulations that require certain disclosures, and impose certain restrictions on expiration dates and on the imposition of inactivity fees, not to mention the applicability of escheat and abandoned property laws that may apply on a state-by-state basis.

If you have been coming back to Legal Bytes to keep up with this and other developments in the law of Advertising Technology & Media (“ATM”), you also know that Keri Bruce in Rimon’s ATM practice group posted a report entitled Gift Cards Tag Along with Credit Card Legislation, noting that federal legislative and regulatory requirements will soon apply to gift cards.

Well, with one legislative delay granted by Congress with respect to certain requirements that apply to gift cards issued before April 1, 2010, the law and corresponding regulations have just now gone into effect.  Time to update the chart for you loyal readers and to entice new visitors to subscribe via email or RSS Feed to keep up-to-date. As before, the US Gift Card Statutory Chart (Updated) is provided at no cost or obligation. As we have said previously, it’s our experience and skill you pay for, not our ongoing research services in areas where we already remain current for a wide variety of clients.

First, the obligatory disclaimers. No chart can be comprehensive or substitute for actually knowing the statutes and regulations. It is a guide, not an authority, and you should not rely on it for anything other than as a roadmap to proper and thorough legal counsel based on the source material itself. That said, I do not wish to trivialize or minimize its value – it represents the distillation of years and hours of work and effort – a special thanks to Keri Bruce for helping to update it.

We point out, as we did previously, that the chart (with one new and notable exception – keep reading) doesn’t cover state escheat, abandoned or unclaimed property laws that may apply to the “breakage” remaining on unused gift cards. It also does not cover the various requirements and obligations applicable to money transmitters under state law. But it does cover disclosure requirements and expiration date restrictions, as well as various exclusions and exemptions; and, of course, it provides citations to the relevant laws in each jurisdiction. Now about that new and notable exception: the chart does make reference to a recent law enacted in New Jersey and applicable to abandoned property (escheat), which effectively alters the tenor and scope of the New Jersey gift card law. Because of the complexity, Legal Bytes has created a separate post that describes that law in greater detail (see, Gift Cards in New Jersey: It’s Complicated).

The chart provides a handy citation and reference tool for the various gift card and gift certificate laws in the 50 states in the United States and the District of Columbia, and now includes a description of the new federal U.S. requirements that have just gone into effect as a result of the Credit Card Act of 2009. In addition, if you have an interest in this area, you really should go back and read (or re-read) the prior Legal Bytes’ posting since it provides valuable context as online loyalty and promotional programs have proliferated, and as gift and payment instruments are increasingly being scrutinized by regulators and legislators and dealt with by the courts. As this update evidences, the law is dynamically changing, evolving and being re-configured to reflect our inter-connected, digital information age. Whether online or offline, this is a sophisticated regulated category of financial payment services and products; in a complex retail, promotional, loyalty-reward consumer environment; with a large number of possible variations; offered and used across multiple jurisdictions; governed by an even larger number of evolving state (and now federal) laws and regulations – and we haven’t even scratched the surface internationally.

So if you are wondering why we give the chart away for free – don’t wonder too long. If you are in this business and you need help from lawyers who know this area and can provide experienced, practical counsel, contact Joseph I. (“Joe”) Rosenbaum or Keri Bruce, or your favorite Rimon lawyer, all of whom will be happy to help.

Gift Cards in New Jersey: It’s Complicated!

As we mention in our post entitled Gift Cards: The Updated Chart is Still Free, a  New Jersey Bill (A3002), effective July 1, 2010, has now amended and expanded New Jersey’s Unclaimed Property Act (the "Act") to apply to stored value cards.  But don’t be lulled into a false sense of security. The Act, as amended, defines "stored value card" as any "record that evidences a promise, made for monetary or other consideration, by the issuer or seller of the record that the owner of the record will be provided, solely or a combination of, merchandise, services, or cash in the value shown in the record, which is pre-funded and the value of which is reduced upon each redemption.  The term ‘stored value card’ includes, but is not limited to the following items: paper gift certificates, records that contain a microprocessor chip, magnetic stripe or other means for the storage of information, gift cards, electronic gift cards, rebate cards, stored-value cards or certificates, store cards, and similar records or cards."

As it relates to unclaimed property and as amended, the Act includes a presumption of abandonment after two years of inactivity and a presumption that if the issuer does not have the address of the purchaser, the address is deemed to be New Jersey, if the card was purchased in New Jersey.  We leave to your assessment and future court battles whether this violates the Supreme Court’s decision in Texas v. New Jersey, 379 U.S. 674 (1965), which rejected a transactional priority rule for reporting unclaimed property.

What is curious about the amended Act is that, although it is an "unclaimed property" statute, it now contains significant stored value card (e.g., gift card) provisions.  The Act prohibits imposition of dormancy fees and, presented here in simplified summary form, exempts stored value cards issued: (i) under a promotional, loyalty or charitable program for which no monetary or other consideration has been tendered; (ii) by an issuer (or "family" of issuers) that sold stored value cards with an aggregate face value in the previous year of $250,000 or less; and (iii) any business or class of businesses that the State Treasurer decides to exempt (see section 5(f) of AB 3002).

But what is most perplexing about the amended Act is that it cross-references New Jersey’s current Gift Card Law (see New Jersey Attorney General – Gift Cards & Gift Certificates), and provides that only a stored value card that is exempt from the Unclaimed Property Act shall be considered a gift card or gift certificate for purposes of the Gift Card Law.  Now if you want the analysis of what the original Gift Card Act covers and how the "exemption" essentially neuters much of that definition, replacing it with the new "stored value" reference – well you are going to have to call Keri Bruce or me.  Bottom line, the amended Act effectively and significantly alters the definition of a gift card and gift certificate under New Jersey law.

More significantly, this inter-relationship between New Jersey’s amended Unclaimed Property Act and its Gift Card Law demonstrates the complexity of developing a legally compliant gift card and gift certificate program.  Now, in the United States at least, an issuer (and sometimes the seller) must comply with the U.S. Federal Credit Card Act of 2009; the gift card and gift certificate laws on the state level; the applicable escheat, abandoned or unclaimed property laws; and an increasingly complex and often perplexing overlap between one or more of these statutes, sometimes, as is the case in New Jersey, including complexities within the same state.

Need help?  Feel free to contact Keri Bruce or Joseph I. ("Joe") Rosenbaum, or the Rimon lawyer with whom you regularly work.  We are all happy to help.

Federal Reserve Board Has a Free Gift (Card) For You

Remember when Legal Bytes posted that little note about gift cards now being part of the Credit Card Accountability Responsibility and Disclosure Act of 2009, for the first time formally bringing gift cards under federal regulation? Remember we told you that as part of the process, “by July 2010, the Federal Reserve Board is to have crafted and approved new rules covering consumer disclosures (i.e., advertising, application forms, etc.)”?

Well today, the Federal Reserve Board announced proposed rules that would restrict gift card fees, limit expiration dates to a minimum of five years (after issuance or the last time funds were loaded), and prohibit dormancy, inactivity, and service fees, unless it was limited to once per month, the consumer was notified, and the inactivity has lasted for at least one year.

The FRB has been busy around Regulation E (EFT). Last week, the FRB announced its Final Rule surrounding ATM and one-time debit card overdrafts (See “The Fed Notices an Overdraft – Decides to Close the ATM Window”, posted on Legal Bytes earlier today). These regulations are also promulgated under Regulation E, and although the proposed rules have not yet been published in the Federal Register (expected soon), you can download a copy here: Federal Register – Gift Card Rulemaking Notice.

Congressional Hammer Poised to Strike at Financial Advertising

The late Will Rogers, that wonderful American humorist from Oklahoma, once said: "This country has come to feel the same when Congress is in session as when the baby gets hold of a hammer." Presumably, the image conjured up by that remark relates to just how much damage can be done before someone takes the hammer away! Well, in those days, Mr. Rogers lauded then-President Franklin D. Roosevelt for taking the hammer away from Congress before they did too much damage. If the strong response the newest Administration/Congressional initiative has evoked from the banking, advertising and media industries is any indication, one might conclude that President Obama has been providing too many hammers these days. This may be a little longer than my usual blog post, but read on . . . you won’t be disappointed.  

To provide a little context for the consternation, a few months ago, gift cards were inserted (for the first time) into federal legislation, ostensibly targeted at the practices of financial institutions applicable to credit cards. Where previously state legislation reigned supreme, the promotion of gift cards, disclosures regarding dormancy or inactivity fees, expiration dates, among other things, became part of U.S. federal law under the new Credit Card Act of 2009.. The legislation was intended to prevent abuses in the credit card industry and protect consumers, and in that spirit, a section covering gift cards seemed like a nice idea. But when it came to gift cards, it was unclear what problems had arisen that were not already (or couldn’t be) dealt with by state law – what was broken that needed to be fixed by federal regulators. Is concentrating regulatory power and discretionary rulemaking in the hands of federal agencies, simply for the sake of control, always a good thing?

So in case you haven’t heard, let’s talk about the newly proposed Consumer Finance Protection Agency (the “CFPA”). The CFPA is part of the Administration’s regulatory reform proposal submitted to Congress a few months ago, intended to provide a new regulatory framework for the financial services industry and, among other things, prevent practices and problems that led to the current crisis in the financial industry. Well, if you are a banker, broker-dealer, insurer or a financial officer, you probably already know the government is considering such major reforms and a restructuring of the current regulatory scheme.

BUT, have the finance folks told the marketing and advertising professionals to start worrying too? Perhaps now would be a good time to do so! In referring to the CFPA, Edward L. Yingling, President of the American Bankers Association, has said, “This agency would have broad powers that go beyond every consumer law that has ever been enacted.” You see, the newly proposed Consumer Financial Protection Agency Act of 2009, now fast-tracking its way through the U.S. House of Representatives, would restructure the Federal Trade Commission and give much of its current responsibility for regulating financial services-related advertising and marketing to a brand new regulatory agency – the newly proposed CFPA. I direct your attention to Subtitle C – Specific Authorities (Sections 131 – 139) of the Act, which would give the new CFPA the authority to review not only consumer lending practices, but also fraud and deceptive advertising, to determine and establish rules governing whether or not marketing practices and advertising are misleading, or if consumer financial products and services are being advertised and marketed fairly to consumers. By the way, the CFPA would also be empowered to interpret and enforce the new Credit Card Act of 2009 noted above. Would it surprise you that the Association of National Advertisers and the U.S. Chamber of Commerce would worry about what a new and potentially confusing and overlapping regulatory scheme, and a completely new regulatory agency, will mean for the advertising, agency and media industries?

If you thought all you had to worry about were things like privacy, behavioral advertising, free speech, blogger liability for claims, ‘Net neutrality, cloud computing, celebrity endorsements and social media – tweet, tweet – think again. Just yesterday, Advertising Age reported that some media industry professionals fear certain aspects of the new legislation will hold media liable for simply running advertisements related to financial services and products that the newly created CFPA believes are misleading. That would effectively push media into the role of de facto censors of advertising content. In other words, it would be a "safer" path (read less legal liability) to simply refuse to accept or run advertising that it determines might be too risky. One section of the proposed bill would empower the CFPA to create standards regarding what is or is not lawful in financial services advertising. Another section could be construed to extend liability to anyone in the chain of development, insertion, creation, displaying or broadcasting an unlawful advertisement. Could that be you?

Continue reading “Congressional Hammer Poised to Strike at Financial Advertising”

Credit Card Act of 2009: Act I, Scene 1

A few months ago, Legal Bytes noted the progress of the Credit Card Act of 2009 (the “Act”), and when it was signed into law, we updated that blog post with a note about the inclusion, for the first time in federal law, of coverage of gift cards.

Today, some of the credit card protections the Act affords consumers go into effect. First, credit card bills must be mailed to the consumer at least 21 days before payment is due. Second, significant changes to the rates or fees that apply to credit cards can’t be implemented unless consumers are given at least 45 days’ notice. In both cases, this represents an elongation of the prior regulations (14 days and 15 days, respectively). 

Provisions of the Act also in effect now prohibit credit card issuers from raising their fees and interest rates without any notice if a credit card account holder fails to make a payment on time or goes over their credit limit. In most cases, such a charge would have required approval from the issuing institution anyway.

Most of the other significant provisions of the Act come into effect next February (e.g., restrictions on increases in interest rates for existing credit card balances), and by July 2010, the Federal Reserve Board is to have crafted and approved new rules covering consumer disclosures (i.e., advertising, application forms, etc.).

If you need to know more about compliance and credit cards—offline or online—contact me (Joseph I. Rosenbaum) or the Rimon attorney with whom you regularly work. We are happy to help.

Gift Cards: The Chart is Free. It’s Our Experience You Pay For.

Last month, Legal Bytes posted Online Gaming Laws Survey – Free (Yes, You Read Correctly), which also included a link that would allow readers to download a copy of a chart summarizing the U.S. laws that apply to online gaming (Survey of U.S. Federal and State Gaming Laws & Regulations). In that posting, I asked “Why would a law firm be giving away such valuable research for free online, on the web, for everyone to see?” The answer, my friend, is . . . (you were expecting a Bob Dylan line, weren’t you) . . .

The answer is simple. We know that many lawyers and firms can do research! While it may come as a shock to some, it comes as no surprise to us that Rimon may not be the only, or even the first, law firm that has done 50-state surveys of various laws and regulations. However—and it’s a big HOWEVER—Legal Bytes may be among the few lawyer-driven blogs that actually gives research away to any visitor to our blog—for nothing. You don’t even have to be a client, but you may want to be. It’s free. Yours for the taking.

It’s free because in this age of information and social media, we believe it’s not the research that distinguishes lawyers or law firms. Oh, of course we must do research and, of course, we need to be good at it. We are. But clients want lawyers who can wisely and effectively apply and use the research; lawyers who know how to use years of hands-on experience gained from working with clients, and apply it to real-world, real-life and real-time situations. We give research away because our sustainable competitive advantage is based on relationships, and the depth and wealth of experience that enables us to bring value to clients when they call.

So, just as with online gaming, we turn today to gift cards and gift certificates, online and offline, and the wealth of experience our Advertising Technology & Media law group has developed and applies regularly for clients. The experience that lets us give valuable research away for free. So enough philosophy, show us the money.

In connection with the work we do for many clients, we have found it useful to develop and maintain a database, which we update periodically, relating to Gift Cards, payment instruments that are increasingly blurred with prepaid debit cards, stored value cards, smart or chip-cards, reward cards, discount certificates, and traditional credit, charge and debit cards. If you are in this market, you already know there are regulations that require certain disclosures, certain restrictions on expiration dates and on the imposition of inactivity fees, as well as escheat and abandoned property laws that may apply on a state-by-state basis. You also know that for the first time, the Credit Card Act of 2009 will impose federal legislative and regulatory requirements on gift cards.

So with pleasure to all of our current (and future) Legal Bytes readers and subscribers, here is a link to our publicly available chart covering Federal and State Gift Card Laws. The chart provides a handy citation and reference tool for the various gift card and gift certificate laws in the 50 United States and the District of Columbia, and includes a description of the newly enacted Credit Card Act of 2009, which provides certain consumer protections applicable to gift cards under U.S. federal law.

Now the disclaimers. First, no chart can be as comprehensive or as up-to-date or clear as actually reading and knowing the statutes and regulations themselves. It is a guide, not an authority, and you should not rely on it for anything other than as a roadmap to proper and thorough legal counsel based on the source material itself. That said, let’s not minimize its value either: it represents the distillation of years, and of hours of work and effort. A special thanks to Keri Bruce and Stacy Marcus for helping to consolidate and refine it so that it is ready for prime time.

Continue reading “Gift Cards: The Chart is Free. It’s Our Experience You Pay For.”

Gift Cards Tag Along with Credit Card Legislation

We previously reported its progress in Legal Bytes and last week, President Obama signed into law the Credit Card Act of 2009. Although the bulk of the Act (and the bulk of the publicity surrounding its enactment and passage) deals with credit cards, it also amends the Electronic Funds Transfer Act and implements federal regulation of general use pre-paid cards, gift certificates and store (retail) gift cards. The new law is scheduled to take effect Aug. 21, 2010, and substantively deals with dormancy fees (so-called “inactivity” or service fees) and expiration dates. 

In the area of dormancy or inactivity fees, the new law prohibits them unless there has been no activity for 12 months. In addition, in order to impose any such fees, certain disclosures must be made to the consumer prior to purchase. The new law also prohibits expiration dates of less than five years, and requires clear and conspicuous disclosure of the expiration date, if any. In addition, gift certificates issued as part of an award, loyalty or promotional program (i.e., no money or other consideration is given) are, as is the case with many state laws, excluded. And speaking of state laws, the Act specifically does not pre-empt state laws that provide greater consumer protection. 

What else should you know. First, plastic cards and payment code devices used solely for telephone services or that are reloadable, are not marketed or labeled as gift cards or certificates, not marketed to the general public, and issued in paper form only (including those that apply to tickets and events), are not covered by the requirements of the new Act.  Second, the law authorizes the Board of Governors of the Federal Reserve, in consultation with the FTC, to develop requirements concerning the amount of dormancy fees that can be charged (only once each month), and to more carefully seek to define which provisions of the Electronic Fund Transfer Act and Regulation E apply in this context. 

So, for states that have had no, or lesser, consumer protections, the Act clearly establishes a minimum federal threshold for the imposition of dormancy fees and the prohibition of expiration dates earlier than five years. For states that already have or may yet impose more stringent requirements, those requirements are specifically permitted under the Act, so you will still have to keep track of state requirements in this area. 

If you need to know, you need to contact Keri Bruce or Joseph Rosenbaum – or your favorite Rimon attorney – who will be more than happy to help you.

Give Credit (Card), No Give a Gift (Card)! Why Not Give Both?

Although consumer credit regulation is hardly new – Regulation E, the Fair Credit Reporting Act, Regulation Z and laws regulating disclosures, debt collection practices, billing statements and the like have been around for decades – for the first time in U.S. history, Federal legislation is tackling pricing, rate modifications, advertising disclosures and fees, and adding a gift card angle as well. 

While the House has not yet passed this or any other version of the legislation, those in the know believe a similar, if not identical, bill will be approved by the House of Representatives and that the President is likely to sign it. 

Are you a bank, payment card association, credit union or financial institution that issues credit cards or gift cards? Here are highlights of the bill that passed the Senate:

  • When marketing, a card issuer would not be permitted to increase any advertised ‘teaser’ rates for at least a year after a new account was opened for the consumer, and promotional rates advertised to consumers must remain in effect for at least six month;
  • Unless the credit-issuing institution can get proof that anyone under 21 can actually repay their credit card debt, credit cards can only be issued to individuals under the age of 21 if a parent, legal guardian or guarantor agrees in writing to be responsible for the debts;
  • If a consumer pays more than the minimum balance due, the excess must be applied to the balance with the highest interest rate;
  • Card issuers will not be allowed to change rates retroactively on existing balances (there is an exception where the consumer is past due by 60 days – which, I guess, presumes that when a consumer can’t afford to pay their balance within 60 days, it’s ok to raise their rates since they probably won’t be able to afford to pay a higher rate either);
  • Bills for balances due must be sent at least three weeks (21 days) before their due date;
  • Card issuers will no longer be able to charge additional fees to consumers for alternate payment mechanisms (e.g., by mail, telephone, online, electronic, wire transfers), unless the consumer requests and the issuer offers some type of ‘expedited’ service;
  • Consumers must be asked if they want to allow ‘over-limit’ credit transactions and if they do not affirmatively consent, the card issuer will not be permitted to charge a fee if the issuer still authorizes the transaction (e.g., your credit limit is $1,000 and you charge something for $1,001 and the authorization system approves the transaction anyway);
  • Changes in the terms and conditions that apply to consumer cardholders will require at least 45 days’ notice; and
  • The minimum amount of time a gift card must remain valid for use will be 5 years. First, it is likely this will apply to gift cards that are consumer-oriented and where full value is paid, and not to discounted, bulk sales, non-consumer, incentive, employer or promotional gift cards – but then the legislation isn’t final yet, is it? Furthermore, the Federal legislation is not likely to preempt more consumer-friendly State law (e.g., California prohibits any expiration date on such gift cards), but it will place a minimum level of consumer protection against earlier expiration, even in States that have no applicable regulation.

There is also consideration being given to removing any current legal and contractual restrictions on merchants that would allow them to differentially price their products and services based on the incremental costs (or savings) of accepting different forms of payment. When credit and debit cards were scarce and cash was king (cash, as in ‘currency’), regulation and industry groups frowned upon differential pricing, arguing that allowing a merchant to charge more for the use of a credit card was discriminatory to the consumer – even though the cost of accepting such payment instruments was higher (the merchant pays a fee (discount rate) to the card-issuing enterprise for the privilege of accepting the particular brand of card). Furthermore, the growth of corporate and purchasing cards and the use of payment instruments in B2B transactions has resulted in situations where a manufacturer accepts a purchasing card (procurement-based credit card) in payment of sales to distributors, wholesalers and retailers – a fee is charged to the manufacturer for the card transaction. This chain continues until a consumer makes a retail purchase, and if any or all of these transactions involve branded payment instruments and not cash, travelers’ checks, bearer bonds or two goats and a chicken, today, a fee would most likely accrue on each payment-card transaction at each step of the way . . . significantly raising the cost to everyone and ultimately the consumer. Stay tuned.

So: Consumer Credit? Co-branded promotions? Loyalty Rewards Programs? Gift Cards? Premiums and Incentives? Retail Promotions? Payment Card Industry (PCI) Data Security Standards? Privacy & Data Protection? Identity Theft? Data Breach? Pre-Screening? Online Digital Payment Systems? Corporate Cards? Purchasing Cards? E-Commerce? Regulation E? Regulation Z? Statement Insert Advertising; Credit/Demographic Market Segmentation? Free? APR? Limited Time Offer?

Any of these sound familiar? It’s what we do? Our Advertising Technology & Media Law Group; our Financial Institutions Group; our Data Security and Identity Theft Group . . . need we say more . . . If you need help (or you are just over stimulated by the flurry of legislation, regulation and excitement), call us or email me at We can help.