key federal regulator has put banks on notice that they need to be more upfront about the terms and conditions of gift cards.

The Office of the Comptroller of the Currency (OCC) expects banks issuing the cards to take steps to ensure both gift card buyers and recipients are aware of any limitations of use.

"The gift card market is growing rapidly, and the terms and conditions of various cards can vary widely," said Comptroller John C. Dugan.

"It's very important that national banks engaged in this business adopt robust disclosure policies so that consumers understand what they are getting when they buy or receive a gift card."

A hot market

The gift card market has been burgeoning the last few years, with merchants and banks alike vying for share. During the 2005 holiday season alone, Americans purchased an estimated $18.5 billion in gift cards, up from $17.3 billion in 2004, according to the National Retail Federation.

Problems have emerged, however, over some terms applied to the cards, most notably expiration dates.

A study last year by Bankrate.com, an online service tracking financial rate information, found that all gift cards sold by financial services firms (banks selling Visa U.S.A.- and MasterCard Wordwide-branded gift cards, plus Discover Financial Services' and American Express Co.'s own gift cards) have expiration dates, with six months being the shortest.

However, only three of the top 20 retailers selling gift cards (Albertson's, Macy's and Bloomingdale's) place expiration dates on their cards, the study found.

Merchant-issued card expiration dates range from two to five years, Bankrate.com reported.

The OCC is concerned that gift card recipients don't get enough information about terms of use, such as expiration dates and fees.

Agency officials point to an increase in consumer complaints concerning gift cards over the past three years.

"Basic information that is most essential to a gift card recipient's decisions about when and how to use the card should be provided on the gift card itself, or on a sticker or tape affixed to the gift card," the OCC said.

The agency also wants banks to develop promotional packaging or inserts clearly identifying the issuer, any fees associated with the cards, and what to do if cards are lost or stolen.

The OCC regulates nationally chartered banks, a category that includes some of the nation's largest banks, including Wells Fargo, Citibank and Bank of America. Any bank with the word "national" in its name, or the suffix N.A., is subject to the OCC's regulatory edicts.

The OCC's guidance does not apply to retailer-issued gift cards, however, which are subject to individual state laws.

Details of the agency gift card ruling are available at www.occ.gov