Some provisions of the landmark CARD Act that went into effect on Sunday give consumers new protections when it comes to gift cards, helping them keep more of their hard-earned dollars in their pockets. The new regulations are a boon to consumers, says Ira Rheingold, executive director of the National Association of Consumer Advocates. "The new law will hopefully end some of the abuses we saw before," Rheingold told Walletpop in a phone interview.
The part of the CARD Act for which people will probably be most grateful is a radical shift in card-expiration policies. Beginning on Aug. 22, gift cards now must have expiration dates at least five years into the future. For reloadable cards, the five-year clock starts ticking the last time funds were deposited onto the card. "So many people were surprised to find that the value of their cards had decreased, that rule in and of itself is a good thing," says NACA's Rheingold. Those expired funds were just money in the pockets of the retailers and issuers, he adds.
The new rules also promise consumers some relief from the seemingly endless parade of fees some gift cards charge. While most cards issued by major retailers don't levy fees, general-purpose cards -- that is, cards with the logo of a network provider -- had been known for charging customers for actions like checking the balance or reloading the card. In many cases, card issuers would charge "inactivity fees" if the card wasn't used for a period of months. As a result, a person who went to use his or her card could find out suddenly that the value on the card had either diminished or vanished entirely. Now, card issuers can't charge these fees unless the card hasn't been used in at least a year; even after a year, they're limited to dinging you with up to one fee per month.
Finally, disclosure information about fees and expiration dates must be printed on the card. You might still see cards offered for sale without this material printed on them, which is because lawmakers gave companies a window of time to sell their existing gift cards (rather than making them destroy the old ones and print up all new ones). The cards without the disclosures can be sold until the end of January 2011, although all new cards that have been printed since last April 1 have been required by law to include the disclosure information.
While all of this is good news for consumers, the fight isn't over yet, says Rheingold. "The challenge is the implementation of the rules," he says. Successful enforcement will depend on the creation of a strong consumer protection bureau willing to go after non-compliant corporations, he says.
"This is an important first step but we can't take our eyes off the ball," he cautions. "I think the thing folks need to remember is that this is step one." While passing the new rules is important, consumers will only benefit if those regulations are enforced, Rheingold says.
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