After stepping into the debit card overdraft fray, the Federal Reserve is now taking on gift cards.
Proposed new regulations would limit the number of fees assessed for inactivity or mere “service,” and would mandate that cards can’t expire in less than five years. As the NY Times Bucks blog writes, the new rules won’t go into effect until next summer, which, if my calendar-reading abilities are up to speed, comes after the holiday shopping season, when many gift cards are purchased. Efforts are already underway to somehow apply the new rules to gifts cards bought in the coming weeks.
Here is the Fed’s announcement, including these key suggestions:
The proposed rules would prohibit dormancy, inactivity, and service fees on gift cards unless: (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. 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.
Follow the Fed’s link if you want to offer your opinion. The Fed is welcoming comments from the public.
Why, you might ask, does the Federal Reserve have to take action? It wouldn’t have to if the banks and card issuers didn’t abuse the good thing that they had going. Much like the debit card overdraft controversy, banks saw gift cards as easy money makers. The small fees they were assessing evolved into bigger fees, and more of them. They got greedy—though I suppose “got” isn’t the right word, because they always have been greedy. Perhaps a better way of putting it is that they got greedy to the point of stupidity, and now the Fed is stepping in to try to protect consumers who don’t read (or don’t understand) the fine print on these products.
Mind you that, as the WSJ reports, the new rules will affect bank-issued gift cards more so than cards issued by retail stores:
The National Retail Federation expects the changes will hit banks harder than retailers, which already have pulled back from expiration dates and various fees. “It really won’t have a big impact on the retail industry,” spokesman Scott Krugman said. “It’s the bank-issued cards that tend to charge fees, and at this point, you’d be pretty hard pressed to find a retail store-issued gift card that has an expiration date.”
Regardless of what kind of gift card we’re talking about or what the rules and fees involved are, take into consideration when you’re shopping that a whole lot of gift cards are never used.