Fed proposes new rules to protect gift card users from fees

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The Federal Reserve today proposed new rules that would protect gift card users from fees and other unexpected restrictions.

Gift cards have been the most-requested holiday item for the last several years, but many shoppers complain about the fine print, which can include hefty charges and quick expiration dates. According to the Fed, more than 95% of Americans have received or purchased gift cards.


Under the proposed rules, gift cards would not expire until at least five years from the purchase date. Service and inactivity fees could only be charged once a month and only after a card had been inactive for at least a year.

“Concerns have been raised regarding the amount of fees associated with gift cards, the expiration dates of gift cards and the adequacy of disclosures,” the Fed said.

“Consumers who do not use the value of the card within a short period of time may be surprised to find that the card has expired or that dormancy or service fees have reduced the value of the card. Even where fees or terms are disclosed on or with the card, the disclosures may not be clear and conspicuous.”

The Fed said the new provisions would be slated to take effect Aug. 22, 2010.

The proposal includes retail gift cards that can be used at a single merchant or affiliated group of merchants, and “network-branded” gift cards that can be redeemed at any store that accepts the card brand.

-- Andrea Chang

Photo: Nati Harnik / Associated Press