Central Illinois Business Magazine

Archive                           December 2011


'tis the season for gift certificates - make sure yours are legal

By Randall Green
CIB Contributor
Published: Dec. 2011

We've all been in that situation -- we stumble across a long-lost gift card or gift certificate that we received a couple of Christmases ago only to find out that it has expired. Some people are disappointed while others are angry that the issuer received their money up front, but now refuses to honor the benefit of the gift. After all, the dollar value on the gift certificate probably doesn't go as far as it did a few years ago when it was purchased, so isn't that punishment enough?

There are certain protections that both state and federal laws provide to protect consumers and well-meaning gift-givers.

The Illinois Consumer Fraud and Deceptive Business Practices Act (the Illinois act) provides protections in a wide variety of consumer transactions, from automobile purchases to animal cremation services. It also provides consumer protections to holders of certain types of gift certificates.

For any gift certificate issued on or after Jan. 1, 2008, the Illinois act prohibits a gift certificate from having: (i) an expiration date earlier than five years after the date of issuance, or (ii) a post-purchase fee, such as an inactivity fee. For gift cards sold prior to Jan. 1, 2008, and containing a post-purchase fee, it is required that they have the terms of the fee conspicuously printed on the certificate in a location that the consumer could see prior to the purchase.

For purposes of the state act, the following do not constitute gift certificates and are not subject to the above restrictions: prepaid calling cards; gift certificates usable with multiple sellers of goods or services; gift certificates distributed as part of an awards, loyalty or promotional program without money or any thing of value given by the consumer; gift certificates sold below face value at a volume discount to employers or charitable organizations for fundraising purposes if the expiration is not more than 30 days; or gift certificates issued for a food product.

The federal Credit CARD Act of 2009 (the federal act) was primarily meant to protect consumers against abuses by credit card issuers by limiting interest rate hikes, offering the right of cardholders to opt out of changes in the terms of their accounts, severely limiting offers of credit to college students, and offering certain minimum payment disclosures on the statements of cardholders. However, the federal act also offers limited protections to consumers of bank-issued gift cards, such as Visa and MasterCard gift cards that can typically be used at almost any retailer.

Like the Illinois act, the federal act prohibits expiration prior to five years after its issuance. However, unlike the Illinois act, the federal act permits post-purchase fees, such as inactivity fees after one year of inactivity and certain other fees, such as those for lost card replacement, balance inquiries or transaction fees, as long as they are properly disclosed. Inactivity fees can only be charged one time per month, but there is no express limit on the amount of the fees.

The federal act does not apply to paper gift certificates, loyalty or promotional gift cards, or reloadable debit cards not marked as gift cards.

If your business offers gift cards or gift certificates, make sure that the gift certificates you issue and your internal policies for redemption don't run awry of state or federal laws because violations of these laws can lead to hefty fines and penalties or even costly litigation.

Randy Green is an attorney at Meyer Capel, a professional corporation. He can be reached at 217-552-1800 or rgreen@meyercapel.com

This article does not constitute legal advice, nor does it create an attorney-client relationship.

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