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New Gift Card Laws Take Effect

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Donald R. Scherer, Esq. Until now, general use prepaid cards, gift certificates and store gift cards have been regulated by a diverse web of state laws. However, on August 22, 2010, new federal legislation took effect regulating the issuance of gift cards and certificates. Violations of these new laws carry stiff penalties, including statutory damages of up to $1,000 per violation.

The new laws make a number of uniform changes. First, they prohibit expiration dates on general use prepaid cards, gift certificates and store gift cards of less than five years. If an expiration date of five years or later is included, the rules regarding expiration must be clearly and conspicuously stated. Prior to this new legislation, Ohio permitted gift cards and certificates to expire after only two years.

Second, they restrict the use of dormancy, inactivity and service fees. These fees cannot be charged unless the seller has met certain disclosure requirements prior to the purchase of the gift card or certificate. Moreover, a fee can be imposed only if there has been no activity on the card or certificate for 12 months. Only one of these fees can be imposed in any given month.

Certain cards and certificates are exempt from the new laws. These include pre-paid phone cards, cards that are reloadable and not marketed or labeled as gift cards or certificates, loyalty, award or promotional gift cards, and cards or certificates not marketed to the general public.

For assistance in determining whether your businesses’ gift cards and certificates comply with the new federal laws, please contact your Stark & Knoll attorney, or, Donald Scherer, at dscherer@stark-knoll.com, (330) 572-1317.

Stark & Knoll Co., L.P.A. 3475 Ridgewood Road Akron, Ohio 44333-3163
Phone: 330-376-3300 Fax: 330-376-6237

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