Federal regulations adopted in 2010 require gift cards to delete inactivity or dormancy fees until a year of non-use, and money on the cards have to be available for at least five years. Starting August 22, 2010, inactivity or dormancy fees cannot kick in on gift cards until after a year of non-use and any money on the cards have to be available for at least five years. Replacement cards can be requested if the card expires, but the funds must remain connected to that account. Following is more information from the Federal Reserve.


Highlights of the Gift Card Rules

     Products covered. The final rule applies to gift certificates, store gift cards, and general-use prepaid cards, as those terms are defined in the Credit CARD Act.

• Covered products include retail gift cards, which can be used to buy goods or services at a single merchant or affiliated group of merchants, and network-branded gift cards, which are redeemable at any merchant that accepts the card brand.
• Consistent with the statute, the final rule does not apply to other types of prepaid cards, including reloadable prepaid cards that are not marketed or labeled as a gift card or gift certificate, and prepaid cards received through a loyalty, award or promotional program.

     Restrictions on dormancy, inactivity, or service fees.  The final rule restricts dormancy, inactivity, or service fees with respect to a gift certificate, store gift card, or general-use prepaid card.

• Dormancy, inactivity, and service fees may only be assessed for a certificate or card if: (1) there has been at least one year of inactivity on the certificate or card; (2) no more than one such fee is charged per month; and (3) the consumer is given clear and conspicuous disclosures about the fees.
• Fees subject to the restrictions would include monthly maintenance or service fees, balance inquiry fees, andRestrictions on expiration dates.

     Restrictiosn on dormancy, inactivity, or service fees. The final rule prohibits the sale or issuance of a gift certificate, store gift card, or general-use prepaid card that has an expiration date of less than five years after the date a certificate or card is issued or the date funds are last loaded.

• The expiration date restrictions apply to a consumer’s funds, and not to the certificate or card itself. The final rule also includes provisions intended to give consumers a reasonable opportunity to purchase a certificate or card with at least five years before the certificate or card expiration date.
• The final rule prohibits any fees for replacing an expired certificate or card, or for refunding the remaining balance, if the underlying funds remain valid.

For more information on what you need to know about new federal rules for gift cards, visit the Federal Reserve website, or refer to the October 29, 2010 Federal Register.

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Paper gift certificates
- from the National Restaurant Association
Generally, gift certificates issued in paper form only are not subject to the new rules.  Below is a detailed explanation of what is considered a paper certificate with examples as prepared by staff charged with implementing the new rules:   

Paragraph 20(b)(5)—Issued in Paper Form Only
1. Exclusion explained.
     To qualify for the exclusion in §205.20(b)(5), the sole means of issuing the card, code, or other device must be in a paper form. Thus, the exclusion generally applies to certificates issued in paper form where solely the paper itself may be used to purchase goods or services. A card, code or other device is not issued solely in paper form simply because it may be reproduced or printed on paper. For example, a bar code, card or certificate number, or certificate or coupon electronically provided to a consumer and redeemable for goods and services is not issued in paper form, even if it may be reproduced or otherwise printed on paper by the consumer.
     In this circumstance, although the consumer might hold a paper facsimile of the card, code, or other device, the exclusion does not apply because the information necessary to redeem the value was initially issued in electronic form. A paper certificate is within the exclusion regardless of whether it may be redeemed electronically. For example, a paper certificate or receipt that bears a bar code, code, or account number falls within the exclusion in §205.20(b)(5) if the bar code, code, or account number is not issued in any form other than on the paper. In addition, the exclusion in §205.20(b)(5) continues to apply in circumstances where an issuer replaces a gift certificate that was initially issued in paper form with a card or electronic code (for example, to replace a lost paper certificate).

2. Examples.
     The following examples illustrate the application of the exclusion in §205.20(b)(5):
     i. A merchant issues a paper gift certificate that entitles the bearer to a specified dollar amount that can be applied towards a future meal. The merchant fills in the certificate with the name of the certificate holder and the amount of the certificate. The certificate falls within the exclusion in §205.20(b)(5) because it is issued in paper form only.
     ii. A merchant allows a consumer to prepay for a good or service, such as a car wash or time at a parking meter, and issues a paper receipt bearing a numerical or bar code that the consumer may redeem to obtain the good or service. The exclusion in §205.20(b)(5) applies because the code is issued in paper form only.
     iii. A merchant issues a paper certificate or receipt bearing a bar code or certificate number that can later be scanned or entered into the merchant’s system and redeemed by the certificate or receipt holder towards the purchase of goods or services. The bar code or certificate number is not issued by the merchant in any form other than paper. The exclusion in §205.20(b)(5) applies because the bar code or certificate number is issued in paper form only.
     iv. An on-line merchant electronically provides a bar code, card or certificate number, or certificate or coupon to a consumer that the consumer may print on a home printer and later redeem towards the purchase of goods or services. The exclusion in §205.20(b)(5) does not apply because the bar code or card or certificate number was issued to the consumer in electronic form, even though it can be reproduced or otherwise printed on paper by the consumer.