A recent Michigan law and impending Federal legislation are reshaping the way businesses can handle the sale and use of gift cards and gift certificates. In November 2008, the State of Michigan passed new laws which mandate that gift cards and gift certificates issued by retailers may not have an expiration date less than 5 years from the date of purchase. Also, no non-use fees or service fees may be deducted from the value of the gift card.
These laws do not apply to a prepaid card issue by a financial institution that may be used at many different types of retailers (such as a prepaid Visa card).
Furthermore, companies cannot refuse partial payment of a good or service with a gift card. In other words, even if the total sale is more than the balance on the card, a business must accept the gift card as partial payment for the good or service. Companies also cannot refuse gift cards during sales or closeouts.
Lastly, the terms and conditions of a gift card cannot be altered after the gift card has been purchased. Terms must be disclosed on the gift card or certificate, on the envelope it comes in, or an 800 number must be provided to obtain the terms and conditions.
To add to all the State changes, President Obama recently signed into law the Credit Card Accountability Responsibility and Disclosure Act. Title IV of the Act—relating to gift certificates, gift cards, and prepaid cards—becomes effective August 22, 2010. These regulations will not have as great an impact in Michigan as they may in other places around the country because Michigan has already enacted rules governing the use of gift cards and gift certificates. The new Federal law provides:
• Gift cards may not expire less than 5 years after the date of purchase (already in effect in Michigan).
• Dormancy fees, inactivity fees, and service fees are prohibited unless (1) there has been no activity with respect to a certificate or card for the preceding 12 months, (2) disclosure requirements are met, (3) not more than one fee per month is charged, and (4) any additional requirements imposed by Federal Reserve Board regulations are met. (Companies in Michigan may still have to follow Michigan laws if stricter).
These State and Federal laws must be strictly followed to avoid becoming liable for damages and penalties.
What recourse do I have with a $150 gift card? The business closed up without any notice. I requested reimbursement by mail and did not get any responce from the owner: Molly McFadden of Midland MI.