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Fed proposes new gift-card rules

Fees and expiration dates would have to be disclosed clearly.

By  Nov 16, 2009 1:44PM

By Elizabeth Strott


With the holiday shopping season fast approaching, the Federal Reserve this morning announced proposed rules that would restrict fees and expiration dates on gift cards.

The rules would protect consumers from hidden fees and costs and would require that gift-card terms and conditions be stated clearly.


"Gift cards are easy to give, but they are also easy to forget. If the card has a monthly fee or expiration date, these can become costly little pieces of plastic," Bill Hardekopf, CEO of and co-author of "The Credit Card Guidebook," told


"Even though gift cards take the hassle out of holiday shopping, you want to use them wisely. It is important to know the terms of the card you are buying," Hardekopf said.


The proposed rules would prohibit dormancy, inactivity and service fees on gift cards, the Fed said, unless there has been at least one year of inactivity on the certificate or card, no more than one such fee is charged per month and the consumer is given clear and conspicuous disclosures about the fees.


Expiration dates for funds underlying gift cards must be at least five years after the date of issuance, or five years after the date when funds were last loaded.


Sales of gift cards approached $25 billion last year, according to the National Retailers Federation, and a new NRF study shows that 55.2% of adults hope to receive one this year. The study shows that 12.6% of people are concerned about expiration dates or fees, with 5.3% worried that the recipient will lose a card or never use it. 


According to a survey from Consumer Reports, 25% of adults who received gift cards in 2008 have yet to redeem at least one card.


American Express (AXP) recently announced it would drop the $2 monthly fee it had charged on its gifts cards, after having gotten rid of the $5.95 fee it charged to replace a lost or stolen gift card. The decision took effect Sept. 30 and applies to new and existing cards.


"This is the (response to) feedback from customers, that having fees was a frustration for them," American Express spokeswoman Marina Norville said. "We do hope other issuers will follow suit. It is the right thing to do for customers."


Under the Credit Card Accountability, Responsibility and Disclosure Act of 2009, new federal credit card rules will ban gift-card fees before one year from purchase, and expiration dates for at least five years. But the new rules won't take effect until August 2010.


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