The Steve Sommers' Readers Digest version of the federal law is as follows:
- If you use expiration dates with your gift cards:
- the expiration term cannot be less than 5 years from the time of purchase or last recharge; and
- you must fully disclose the expiration date policy on the card and inform the purchaser prior to the purchase of the gift card.
- If you charge service fees to your gift cards:
- you cannot charge more than a single fee per month (for most merchants, no big deal),
- the fees can only be charged after one year of dormancy; and
- you must fully disclose the fees on the card and inform the purchaser prior to the purchase of the gift card.
Now a possible gotcha here is the term dormancy -- the law states “there has been no activity with respect to the certificate or card in the 12-month period ending on the date on which the charge or fee is imposed.” Nowhere do I see a definition of “activity.” I know that California considers a balance inquiry as activity; other state only consider adding funds or purchase usage as activity. I'm sure we'll be hearing about this in court.
My recommendation: Don't use card expiration dates and instead charge a monthly service fee sometime after one year of dormancy. To be safe, I would interpret dormancy as any activity including balance inquiries.
I've always recommended not using expiration dates because many states have laws that "expired funds" are to be turned over to the state. Also, some states like California do not allow merchants to use expiration dates. If you still want to use expiration dates, I recommendation would be to not allow recharging the cards as each recharge will add a minimum of five years to the expiration date of the card.
In either case, fully document and prominently display your terms to the purchaser prior to selling the gift card. Any and all card carriers and displays should have the terms. Your web site should have a dedicated gift card page with the terms and conditions and your card stock or gift certificates should have the URL printed on it. The more places you disclose this information, the better. You don't want to be on the receiving end of a “they didn't warn me” accusation.
This Readers Digest version and recommendation, for the most part, only considers this specific federal law. You will need to incorporate any state or local laws that also apply. On the ConsumersUnion.org I did find a summary of various state laws regarding gift cards I thought useful: State Gift Card Protection Laws
Hope this info helps someone.