Alert April 30, 2013

CFPB Issues Final Determinations on Preemption of State Gift Card Laws

The CFPB issued final determinations regarding whether the Electronic Fund Transfer Act and its implementing regulation, Regulation E, preempt certain provisions of the unclaimed property laws of Maine and Tennessee. The EFTA and Regulation E grant the CFPB the authority to make a preemption determination as to whether any inconsistency exists between the EFTA and state law relating to the "expiration dates of gift certificates, store gift cards, or general-use prepaid cards." In August 2012, the CFPB issued a notice of its intent to make a preemption determination (see August 21, 2012 Alert) related to Maine’s Unclaimed Property Act and Tennessee’s Uniform Disposition of Unclaimed (Personal) Property Act.

Maine’s abandoned property law provides that gift obligations and stored-value cards are presumed abandoned two years after the later of December 31of the year in which the obligation arose or the most recent transaction involving the obligation or stored-value card occurred. However, Maine’s Office of the State Treasurer, which requested the preemption determination, interprets Maine’s law to require a holder to continue to honor a gift card even after the property is presumed abandoned under the law and may only request reimbursement from the state. The CFPB determined that Maine’s law was not preempted because it "does not interfere with consumers’ ability to use their gift cards at the point-of-sale for at least as long as they are guaranteed that right by the EFTA and Regulation E."

However, the CFPB determined that Tennessee’s gift card law was preempted by federal law because "the effect of the [Tennessee law governing abandoned property] is to permit cards and their underlying funds to expire sooner than is permitted under the EFTA and Regulation E." In particular, Tennessee’s abandoned property law provides, in relevant part, that property "is presumed abandoned if it remains unclaimed by the owner upon the earlier of: (1) the expiration date of the certificate; or (2) two years from the date the certificate was issued." Under Tennessee law, the property must be transferred to the state by May 1 of the following year and, pursuant to state law, the person that transferred a gift cards’ value may elect to honor the card and request reimbursement from the state. Unlike Maine’s law, Tennessee’s law does not require issuers to honor the gift card when the funds are presumed abandoned.