Congress has passed H.R. 5502, which amends the effective date of gift card provisions mandated by the Credit CARD Act of 2009. The next step is the President's desk and you can bet the farm he will sign it into law.
UPDATE: The President signed H.R. 5502 into law on July 27, 2010.
Expiration And Fee Requirements Remain The Same
It's important to be clear, this amendment does not change the fact beginning August 22, 2010 gift cards sold may not expire in less than five years, fees may not be charged unless the gift card has been inactive for 1 year and only one fee per month may be charged.
The Reasoning Behind The Change
The purpose of the H.R. 5502 is to avoid the destruction of existing gift card stock already produced which do not meet the new federal gift card law requirements for fee and expiration disclosure; H.R. 5502 is also know as ECO-Gift Card Act.
In short, gift cards produced prior to April 10, 2010 will not have the same disclosure requirements originally described by the CARD Act of 2009. However, the extension is temporary and beginning January 31, 2011 the original disclosure requirements must be meet by all gift cards sold regardless of production date. Furthermore, during the extension gift card sellers must provide notice of fees and expiration "via in-store signage, messages during customer service calls, Web sites, and general advertising".
Bottom line, consumers will see gift cards sold this holiday season which contain incorrect expiration dates or do not fully disclose fees on the gift card, but merchants will relay the message in other ways.
How Fifteen Months Become Five Months
Consumers might wonder why such an extension is necessary when the Credit CARD Act of 2009 was singed into law on May 22, 2009 and the gift card provisions were set to go into effect fifteen months from the effective date of the bill (August 22, 2010). Fifteen months is plenty of time to plan for the transition.
The Credit CARD Act of 2009 contains a subsection for "additional rule making". Such additional rules were to be finalized no later than 9 months from the date the Credit CARD Act of 2009 was enacted, in other words, February 22, 2010. It turns out, the Federal Reserve didn't finalize the rules until March 22, 2010. As a result, the lead time was reduced from 15 months to 5 months.
My Thoughts
Delaying the effective date of consumer protection for gift cards is not something I'd like to see. However, these amendments are both reasonable and fair. At the end of the day gift card laws are moving in the right direction, but there remains much to be discussed.
For more information on gift card laws, take a look at ScripSmart's summary of the new federal gift card law and each state's gift card law.
