New bill would eliminate prepaid card expiration dates

On Nov. 23, 2012, U.S. Senator Richard Blumenthal, D-Conn., introduced the Gift Card Consumer Protection Act. If enacted into law, the legislation would modify the Electronic Fund Transfer Act to unilaterally eliminate expiration dates and certain fees from virtually all prepaid card programs.

S. 3636, entitled A bill to provide increased consumer protections for gift cards, reads, "It shall be unlawful for any person to impose a dormancy fee, an inactivity charge or fee, or a service fee with respect to a gift certificate, store gift card, or general-use prepaid card."

Sen. Blumenthal said, "This bill bars absolutely draconian deadlines and abusive fees and charges that unfairly confiscate consumer gift card cash. Gift card companies fatten their profits and shrink consumer wallets with exploitative expiration dates and petty, underhanded junk fees. Gift cards should not be the gift that keeps on taking. This measure assures that consumers get their money's worth, no matter when they use the gift card."

Blumenthal's office added that the bill's expiration date prohibition would also extend to loyalty, promotion and reward cards. "These are cards consumers receive by redeeming credit card points or buying a certain product," the senator's office said. "Currently, most of these cards have very short expiration dates – sometimes as short as 30 days, which confuses customers who assume these cards have the same protections as gift cards. Under the Gift Card Consumer Protection Act, these cards would have the same protections as gift cards."

The bill also prevents issuers or retailers to offer basically any kind of prepaid card if they had filed for bankruptcy protection; in addition, those entities must honor unredeemed cards even if the entities are in a state of bankruptcy. "This provision would prevent consumers from buying or being stuck with a worthless gift card after a company goes out of business," Blumenthal's office said.

The senator's office referenced the 2008 bankruptcy of electronics retailer Sharper Image, where the company's customers were forced to spend double the amount on their unredeemed gift cards and then the company stopped accepting gift cards altogether after it filed for bankruptcy. The office also noted two other companies, Circuit City Stores Inc. and Linen 'n Things, that filed for bankruptcy protection in 2008 but allowed customers to buy gift cards from their stores anyway.

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