The following question was submitted to John Roska, an attorney/writer whose weekly newspaper column, "The Law Q&A," ran in the Champaign News Gazette.
When can gift cards or certificates expire? I want to avoid any surprises on the cards I give.
A combination of 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, and 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, and turned over to the state, unless the card never expires and never charges fees. To avoid having to mess with the Unclaimed Property Act, many issuers of gift cards in Illinois avoid expiration dates and fees.
The second law to regulate gift cards was a 2008 addition to the Illinois Consumer Fraud Act that prohibits expiration dates and fees. But, it 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, like 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” rules require gift cards to last at least 5 years before you lose your money. Careful--a card can expire, so it won’t buy stuff anymore, 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. 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, since that’s prohibited by our Consumer Fraud Act.
The main exception to all these laws are promotional, loyalty, or reward cards. Those can expire, and charge fees, 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 can prosecute violations of the Illinois laws, and the FTC enforces the federal law. Complaints about violations should be made to both. Although most Illinois gift cards should not expire, be careful that the store does not go out of business like Borders and Circuit City. Gift cardholders can 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, since they can be totally bogus, or less than you expected. And scammers can apparently 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. Gift cards are now America’s favorite holiday gift. In 2007, about $8 billion of all gift cards went unspent. In Illinois, stores can’t just pocket that unused value anymore.