The Federal Reserve announced new rules concerning gift cards to protect the consumers’ interests against abuse by credit card issuers. For long now, consumers had to cough up hefty fees and charges on account of servicing, inactivity or dormancy. To top it, the expiry dates of gift cards can be short, which leads consumers to losing money on these cards without even using them.
Incidences of consumers having to pay unnecessary charges and losing money because of expiration are not uncommon. Most of us have faced such issues and gift card users have been complaining about it for long. The Fed has been seeking inputs from all sections since November on card rules and received several inputs on what changes are sought in the cards industry. A number of individuals had urged the Fed to have card companies do away with expirations and fees on gift cards.
The new rules will ban card issuers from levying abusive fees, charges and restrictions on gift card users. The issuers will not be allowed to charge any service, inactivity or dormancy fees during the first one year. Only after that, can they levy any kind of charges, which will also have to be pre-stated and appropriately informed to the gift card users.
The charges, if any levied after the first 12 months can not be applied more than once a month. In addition, no cards can expire before five years of issue or loading of funds. Early expiration was a major source of grievances relating to the gift cards.
These gift card rules will cover all kinds of retail gift cards, which are issued by a merchant, a group of merchants or a branded credit card networks like American Express. These new rules will be put into implementation from 22nd August, 2010 and will be under the provisions of Credit Card Accountability Responsibility and Disclosure Act of 2009.
Senator Charles Schumer who had championed the cause of removal of abusive gift card charges and expiration is also pushing for early implementation of these rules so that gift card owners do not continue to get fleeced until later this summer.
The gift card industry is a growing one and accounted for around 87 billion dollars of business last year. Some states already had some laws restricting levy of fees etc, but the recently announced rules will now allow for blanket coverage on all kinds of gift cards issued across the country.
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