National Consumers League

NCL Continues Fight for Gift Card Users' Rights


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By John Breyault, Vice President of Public Policy, Telecommunications and Fraud Last November, the National Consumers League released its “Gift Card Holder’s Bill of Rights,” along with Consumer Action and the Montgomery County (Maryland) Office of Consumer Protection.  In that document, we enumerated ten pro-consumer steps that issuers of prepaid gift cards should take to help consumers during the holiday season. We were pleased when in May of this year, President Obama signed into law the Credit CARD Act of 2009.  That Act, among its many pro-consumer provisions, included a number of new limits on gift cards.  Those limits included:

  • Outlawing dormancy fees, inactivity charges or fees, or service fees unless the card has not been in use for 12 months since the date of purchase or the last time funds were reloaded onto the card.
  • Preventing one that one such fee to be charged in a single month.
  • Increasing disclosure requirements related to fees
  • Prohibiting the sale of gift cards with expiration dates less than five years after the sale of the card or the date on which the card was last reloaded with funds
These provisions are set to take effect on February 22, 2010. Last week, American Express, the largest issuer of the so-called “open loop” gift cards (also known an “universal” or “general purpose” cards -- which can be used at any retailer that accepts credit cards), announced that the company would immediately eliminate all monthly fees on gift cards, including those that consumers have already purchased. The American Express announcement was welcome news, addressing several of the provisions in our “Gift Card Holder’s Bill of Rights.” On Wednesday, NCL testified at a hearing of the District of Columbia City Council on legislation proposed by Councilmember Mary Cheh that would strengthen gift card holder’s protections even further than the federal Credit CARD Act.  NCL Executive Director Sally Greenberg recommended that the legislation implement a number of the “Gift Card Holder’s Bill of Rights” provisions, including:
  • Capping the up-front fee on the sale of gift cards at $5 or 10% of the cards value, whichever is less
  • Prohibiting any expiration dates on gift cards
  • Making cards with less than $5 in value remaining redeemable for cash, without a fee
  • Applying the unused funds from cards that accrues to state governments under unclaimed property laws to benefit consumers
  • Protecting consumers from card issuer bankruptcy by segregating the funds from the sale of cards into separate trust accounts
We urged the District to take these pro-consumer steps, which would place it at the vanguard of states seeking to enact robust consumer protection laws in the gift card market. NCL full testimony is available by clicking here.