As part of the Credit Card Accountability Responsibility and Disclosure Act of 2009, Congress took aim at many of the practices surrounding gift cards purchased by consumers. If your business issues gift certificates or gift cards, you will want to be familiar with the rules which took effect August 22, 2010.
Some of the changes include restrictions on service fees for inactive or dormant cards. In the past, consumers may get a card as a gift or put it away and forget about it. The card issuers would charge fees onto the card so that over time, the balance would dwindle down, historically to zero. Under the new gift card rules, they will only be allowed to charge these fees if there has been no activity on the card within the one year period prior to the charging of the fee. The business or card issuer is also restricted to being able to charge one fee per calendar month. In addition, they must declare any fees clearly and conspicuously on the gift certificate or gift card and the disclosures must be provided to the purchaser before the purchase of the gift card.
Restrictions will also be placed on the expiration dates of gift cards and gift certificates. The money on a gift card or certificate can not expire for a period of five years from the date of issuance (or the last load of funds for gift cards). As was the case related to fees, and expiration must be clearly disclosed on the gift certificate or gift card and disclosed prior to the purchase of the card.
If your business sometimes issues "promotional" gift certificates that are essentially coupons, you could fall under some of these rules as well. In order to avoid consumer confusion, the new rules require that if you issues a loyalty, award or promotional gift card or gift certificate that you must clearly start on the front that it issued for that purpose. For instance, if you have a restaurant and you sent out 5,000 promotional "gift certificates" for $ 5 each in the local paper, you would be required to start on the gift certificate that was for promotional purposes and the expiration date of the gift certificate , if any. If a "gift certificate" is issue for promotional purposes the 5-year expiration date rule does not apply.
If your small business uses gift certificates or gift cards, it is a good idea to make sure that you understand these rules and that you have the proper policies and procedures in place to make sure that you are following the new rules. With the overwhelming amount of regulation that is hitting small businesses on an almost daily basis, it is important to make sure that you are receiving the proper business, financial and legal guidance from your accountant and attorney on these issues.