Carol Van Cleef, a partner in the firm’s Washington office, wrote an article on May 16, 2010, for The Prepaid Press about new federal rules on pre-paid cards.
In May 2009, President Obama signed the Credit Card Accountability, Responsibility and Disclosure Act, a law that attempts to protect consumers from hidden fees and rate hikes. The law also contains a “gift card” provision. A major challenge of this new regulation, which becomes effective on August 22, 2010, is the compliance burden it will impose on card issuers, managers and merchants that sell the cards, according to Van Cleef.
According to The Prepaid Press article, “the regulation (1) prohibits the imposition of dormancy, inactivity, or service fees unless certain requirements are satisfied, (2) prohibits their sale or issuance if they have an expiration date of less than five years, and (3) mandates certain disclosures.”
Gift certificates, store gift cards and general-use prepaid cards are covered underthe new law, with each of these terms carefully defined to determine which products are subject to the new regulation.
“In light of these definitions and exclusions, everyone in a product’s distribution chain should be prepared to determine whether a product is a gift certificate, a store gift card, or a general-use prepaid card,” Ms. Van Cleef wrote.