Money & Debt

The following question was originally submitted to John Roska, a lawyer Someone who represents clients in courts or who gives legal advice and writer for the weekly column "The Law Q&A" in the Champaign News Gazette. The article has been updated to include changes in the law and additional information.

Question

When can gift cards or certificates expire? I want to avoid any surprises on the cards I give.

Answer

Both state and federal law now regulates gift cards and certificates. In Illinois, the combined effect is basically that gift cards and certificates should never expire. They also should never have fees.

The first law to regulate gift cards was the Illinois Unclaimed Property Act. Since 2005, that law has required that any unused portion of any gift card must be treated as unclaimed property. This means it must be turned over to the state. That is, unless the card never expires and never charges fees. To avoid having to mess with the Unclaimed Property Act, many gift card issuers in Illinois avoid expiration dates and fees. In 2007, about $8 billion of all gift cards went unspent. In Illinois, stores can't just pocket that unused value anymore.

The second law to regulate gift cards was a 2008 addition to the Illinois Consumer Fraud The deception of someone(s) with intent to cause damage (not including  forgeries and counterfeiting). Act. The addition prohibits expiration dates and fees. This law, however, only applies to store cards, including stored-value cards (e.g., Starbucks Cards). It does not apply to gift cards that can be used at multiple places. For example, it does not apply to those issued by credit card companies or a mall. In 2010, gift cards became regulated by federal law. The rules enforcing the Credit Card Accountability Responsibility and Disclosure Act apply to both store gift cards and cards issued by credit card companies. The “CARD Act” requires gift cards to last at least 5 years before you lose your money. Careful--a gift card can expire before you lose your right to a refund.

The federal law allows fees if they’re clearly disclosed. Inactivity fees are OK only after at least one year of inactivity and then, only one fee per month. But, in Illinois those fees would only be OK on gift cards issued by credit card companies, or by multiple merchants. Store gift cards shouldn’t expire or charge fees. That is because it is prohibited by our Consumer Fraud Act.

The main exception to all these laws are promotional, loyalty, and reward cards. All of these can expire and charge fees. This is because they’re not marketed as gifts that consumers buy to give to others. The Consumer Fraud Act does not cover gift certificates for a “food product".

Attorney General Madigan prosecutes violations of the Illinois laws. On the other hand, the FTC enforces federal law. Complaints about violations should be made to both. Although most Illinois gift cards should not expire, beware of stores that may go out of business, like Borders and Circuit City. Gift card holders may be out of luck when the issuer goes out of business, or closes a nearby store.

Also be careful about possible gift card scams. Cards from auction sites are especially risky. They can be totally bogus, or contain less value than you expected. And scammers may get information from publicly displayed cards, wait for the card to be activated, and then hijack its value. Therefore, some advise buying only cards that are kept behind the counter.