New rules coming Aug. 22 will govern gift cards
The last of the federal rules overhauling terms on credit and gift cards kick in next week, the final step in a year-long redesign of the industry following years of consumer abuse.
“These new gift card regulations are important for what they do, but also for what they don’t do,” said William Lund, a state financial regulator from Maine who has tracked the gift card changes.
“The one thing you can be sure of is that a card’s value will never be greater than the date it’s received,” he said.
The most critical of the new rules is the elimination of expiration dates in the first five years — but only on those branded cards such as VISA, MasterCard or American Express, as well as retailer-issued cards.
Also to disappear in a card’s first year are the fees for non-use that sucked up most of a card’s value. That provision was a huge money-maker for gift-card issuers considering that more than $5 billion in gift cards went unused last year.
“Gift cards are big, big business in the U.S. with more than $80 billion worth of cards purchased in 2009,” Lund said. “During the past five years, consumer complaints about ‘surprise’ fees and short expiration dates on many cards caused 40 states to enact protective laws.”
What the rules don’t do, however, is limit the fees that can be charged after the first year.
And, to make it harder still, although the value of a card might not expire for at least five years, the card itself can.
“Card manufacturers said they couldn’t guarantee the physical card wouldn’t expire in five years,” said Michelle Jun, staff attorney at Consumers Union, the publishers of Consumer Reports. “Much of that related to unsold cards on a store rack.”
What that means is consumers with a card older than a year will have to request a replacement if it’s expired. And there should be no fee involved in getting one, Jun said.
The provisions do not apply to rebate cards, paper gift certificates, general-use prepaid cards that can be reloaded, or cards issued before Aug. 22, when the rules begin.
Another potential wrinkle is federal legislation approved last month that gives card issuers until January to disclose the new rules.
This allows businesses to sell cards made before April that don’t include the new disclosures rule printed on them, according to published reports. The merchants must inform consumers about the disclosure rules in store signs, on their websites or in ads.
Additional rules affecting credit cards also kick in on Aug. 22.
Penalties for making a late payment are capped at $25 for the first violation. Miss it again within six billing cycles and it rises to $35.
The late-payment fee and other punitive fees also may not exceed the amount of the violation. That means if you’re over your credit limit by $10, that’s the most you can be dinged; or if you miss a minimum payment, say $20, the penalty can’t exceed that amount.
Penalties of $40 or more were common before the federal overhaul.
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