US: New York extends minimum term for gift cards from 5 to 9 years

In short

On December 10, 2021, New York Governor Kathy Hochul signed into law Senate Bill S3467B (A.4629-C), which strengthens consumer protections under New York card law. gifts and gift certificates. The new law eliminates fees (with the exception of certain activation fees), prohibits expiration dates earlier than nine years from issuance, prohibits devaluation of funds for lack of use, and establishes a mechanism cash refund. It comes into force on December 10, 2022. Upon passing it, Assemblyman Nader Sayegh, co-sponsor of the bill, said, “It’s just plain wrong to receive a gift card or check -gift only to learn later that the value of the gift has automatically decreased in value over time, or expired.”

Key points to remember

Gift cards and certificates are regulated by federal law under the Credit Card Accountability and Disclosure (CARD) Act of 2009, which strengthens disclosure requirements for businesses, allows (but limits) related fees and charges for consumers and prohibits the expiration of gift cards. and certificates that are less than five years old from the date the card or certificate was issued or the date the funds were last loaded.

In 2016, New York, like many other states, codified the protections afforded by the CARD Act by amending its existing gift card law (NY General Business (GBS) Law § 396-i), which also required disclosures and an expiry date which is no earlier than five years after the issue of the card or certificate, or the date on which the funds were last loaded. This new law changes the status of New York gift cards by:

  • Prohibit gift card fees: The new law generally prohibits fees attached to gift cards, including activation fees, retroactive fees, redemption fees, service fees, dormancy and latency fees, administrative fees, processing, access fees, recurring fees, renewal fees and reload fees. The law contains a limited exception for activation fees, which cannot exceed nine dollars, related to the cost of issuing “open-loop” gift certificates, which are defined as those that can be redeemed at multiple merchants. or unaffiliated service providers.
  • Ban gift cards that decrease in value over time: The new law prohibits gift cards that decline in face value or balance due to the passage of time or dormancy. Under the law, dormancy means failure to use the gift card, including using the card to buy something or adding value to the card.
  • Increase in the minimum period of validity: Under the new law, a gift card cannot expire for nine years from its date of issue or the date funds were last loaded onto the card, whichever is later. . This provision extends the five-year minimum term of the previous law.
  • Request a cash refund: The new law requires issuers to allow cash redemption of gift cards with a remaining balance of less than five dollars. This requirement does not apply to open circuit gift certificates or promotional gift certificates (defined as a gift certificate issued without consideration).

This new legislation provides businesses with the opportunity to review their gift card policies to ensure compliance with federal and state laws in which the business operates. The new law will enter into force on December 10, 2022.

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Michael N. Clark