Alert August 21, 2012

CFPB Issues Notice of Intent to Make Preemption Determination on State Gift Card Laws

The CFPB issued a notice that it will consider whether the unclaimed property laws applicable to gift cards in Maine and Tennessee are preempted by the Electronic Funds Transfer Act and its implementing regulation, Regulation E. The EFTA preempts a state law to the extent that the state law is inconsistent with the EFTA and does not afford consumers greater protection than federal law.

Regulation E prohibits the sale or issuance of gift certificates, gift cards and prepaid cards in which the underlying funds have an expiration date that is not at least the later of: (1) five years after the date the card was issued or when funds were last loaded onto the card, or (2) the card’s expiration date. Under Maine’s Uniform Unclaimed Property Act, gift obligations or stored value cards are deemed abandoned the later of two years after December 31 of the year the obligation arose or two years after December 31 of the year the last transaction involving the obligation or card occurred. Under Tennessee’s Uniform Disposition of Unclaimed (Personal) Property Act, gift certificates with an expiration date are deemed abandoned on the earlier of the date the gift certificate expires or two years from the date of issuance. The CFPB is seeking public comment on the following: (1) whether the laws of Maine or Tennessee are inconsistent with the EFTA and Regulation E, (2) the nature of any inconsistency, (3) whether and how gift card issuers can comply with both state and federal law, and (4) whether the laws of Tennessee or Maine afford consumers greater protection than federal law. Comments are due on October 22, 2012.