Consumer Financial Services Alert - March 23, 2010 March 23, 2010
In This Issue

FRB Issues Final Gift Card Rules

Today, the FRB issued a final rule amending Regulation E to restrict gift card fees and expiration dates. The rule implements the gift card provisions in the Credit Card Accountability Responsibility and Disclosure Act of 2009.

The scope of the final rule is generally limited to gift certificates, store gift cards, or general-use prepaid cards sold or issued to consumers primarily for personal, family, or household purposes. Thus, the rule generally does not apply to cards, codes, or other devices used for business purposes, such as to pay for business travel expenses or office supplies.

Under the rule, a dormancy, inactivity, or service fee may not be imposed on a gift certificate, store gift card, or general-use prepaid card, unless three conditions are satisfied. First, such fees may be imposed only if there has been no activity with respect to the certificate or card within the one-year period prior to the imposition of the fee. Second, only one such fee may be assessed in a given calendar month. Third, disclosures regarding dormancy, inactivity, or service fees must be clearly and conspicuously stated on the certificate or card, and the person issuing or selling the certificate or card must provide these disclosures to the purchaser before the certificate or card is purchased. The rule includes in the definition of “service fee” both account maintenance fees that are charged on a recurring basis as well as activity-based fees which may occur from time to time, such as per transaction, balance inquiry, ATM, and reload fees.

The rule provides that a gift certificate, store gift card, or general-use prepaid card may not be sold or issued unless the expiration date of the funds underlying the certificate or card is no less than five years after the date of issuance (in the case of a gift certificate) or five years after the date of last load of funds (in the case of a store gift card or general-use prepaid card). In addition, information regarding whether funds underlying a certificate or card may expire must be clearly and conspicuously stated on the certificate or card and disclosed prior to purchase.

The rule also generally requires a certificate or card to include a disclosure alerting consumers to the difference between the certificate or card expiration date and the funds expiration date, if any, and that the consumer may contact the issuer for a replacement card. This disclosure must be stated with equal prominence and in close proximity to the certificate or card expiration date. Non-reloadable certificates or cards that bear an expiration date on the certificate or card that is at least seven years from the date of manufacture need not include this disclosure, however.

The rule prohibits the imposition of any fees for replacing an expired certificate or card if the underlying funds remain valid, to ensure that consumers are able to access the underlying funds for the full five-year period. The rule also provides, however, that in lieu of sending a replacement certificate or card, issuers may remit, without charge, the remaining balance of funds to the consumer.

In addition to the restrictions for dormancy, inactivity, or service fees, the rule requires the disclosure of all other fees, such as initial issuance fees and cash-out fees, imposed in connection with a gift certificate, store gift card, or general-use prepaid card. These disclosures must be provided on or with the certificate or card and disclosed prior to purchase. The rule also requires disclosure on the certificate or card of a toll-free telephone number and, if one is maintained, a web site, that a consumer may use to obtain fee information or replacement certificates or cards.

Click here for the notice that will be published in the Federal Register. The rule is effective August 22, 2010.

Federal Banking Agencies Adopt Final Changes to CRA Q&As

The federal banking agencies issued final changes to their Community Reinvestment Act questions and answers that include one new Q&A, and revisions to two others. The new Q&A provides examples of how to demonstrate that community development services meet the criteria for serving low- and moderate-income individuals. The revised Q&As explain under what circumstances institutions may claim a pro rata share of mixed-income affordable housing projects as community development projects. Click here for the Q&As.


The FFIEC issued frequently asked questions concerning the Secure and Fair Enforcement for Mortgage Licensing Act. The FAQs cover questions about federal registration of mortgage loan originators who are employees of depository institutions, including when registrations must be completed. Click here for the FAQs.