[Federal Register Volume 74, Number 223 (Friday, November 20, 2009)]
[Proposed Rules]
[Pages 60986-61012]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-27717]



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Part III





Federal Reserve System





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12 CFR Part 205



Electronic Fund Transfers; Proposed Rule

  Federal Register / Vol. 74, No. 223 / Friday, November 20, 2009 / 
Proposed Rules  

[[Page 60986]]


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FEDERAL RESERVE SYSTEM

12 CFR Part 205

[Regulation E; Docket No. R-1377]


Electronic Fund Transfers

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Proposed rule; request for public comment.

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SUMMARY: The Board is proposing to amend Regulation E, which implements 
the Electronic Fund Transfer Act, and the official staff commentary to 
the regulation, which interprets the requirements of Regulation E. The 
proposal restricts a person's ability to impose dormancy, inactivity, 
or service fees for certain prepaid products, primarily gift cards. In 
addition, the proposal generally prohibits the sale or issuance of such 
products if they have an expiration date of less than five years. The 
proposed amendments implement statutory requirements set forth in the 
Credit Card Accountability Responsibility and Disclosure Act of 2009 
that are effective on August 22, 2010.

DATES: Comments must be received on or before December 21, 2009.

ADDRESSES: You may submit comments, identified by Docket No. R-1377, by 
any of the following methods:
     Agency Web Site: http://www.federalreserve.gov. Follow the 
instructions for submitting comments at http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm.
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     E-mail: [email protected]. Include the 
docket number in the subject line of the message.
     Fax: (202) 452-3819 or (202) 452-3102.
     Mail: Jennifer J. Johnson, Secretary, Board of Governors 
of the Federal Reserve System, 20th Street and Constitution Avenue, 
NW., Washington, DC 20551.
    All public comments are available from the Board's Web site at 
http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as 
submitted, unless modified for technical reasons. Accordingly, your 
comments will not be edited to remove any identifying or contact 
information. Public comments may also be viewed electronically or in 
paper form in Room MP-500 of the Board's Martin Building (20th and C 
Streets, NW.) between 9 a.m. and 5 p.m. on weekdays.

FOR FURTHER INFORMATION CONTACT: Ky Tran-Trong, Counsel, Vivian Wong, 
Senior Attorney, or Mandie Aubrey or Dana Miller, Attorneys, Division 
of Consumer and Community Affairs, Board of Governors of the Federal 
Reserve System, Washington, DC 20551, at (202) 452-2412 or (202) 452-
3667. For users of Telecommunications Device for the Deaf (TDD) only, 
contact (202) 263-4869.

SUPPLEMENTARY INFORMATION:

I. Statutory Background

    The Electronic Fund Transfer Act (15 U.S.C. 1693 et seq.) (EFTA or 
Act), enacted in 1978, provides a basic framework establishing the 
rights, liabilities, and responsibilities of participants in electronic 
fund transfer (EFT) systems. The EFTA is implemented by the Board's 
Regulation E (12 CFR part 205). Examples of the types of transactions 
covered by the EFTA and Regulation E include transfers initiated 
through an automated teller machine (ATM), point-of-sale (POS) 
terminal, automated clearinghouse (ACH), telephone bill-payment plan, 
or remote banking service. The Act and regulation provide for the 
disclosure of terms and conditions of an EFT service; documentation of 
EFTs by means of terminal receipts and periodic statements; limitations 
on consumer liability for unauthorized transfers; procedures for error 
resolution; and certain rights related to preauthorized EFTs. Further, 
the Act and regulation restrict the unsolicited issuance of ATM cards 
and other access devices.
    The official staff commentary (12 CFR part 205 (Supp. I)) 
interprets the requirements of Regulation E to facilitate compliance 
and provides protection from liability under Sections 915 and 916 of 
the EFTA for financial institutions and other persons subject to the 
Act who act in conformity with the Board's commentary interpretations. 
15 U.S.C. 1693m(d)(1). The commentary is updated periodically to 
address significant questions that arise.
    On May 22, 2009, the Credit Card Accountability Responsibility and 
Disclosure Act of 2009 (Credit Card Act) was signed into law.\1\ 
Section 401 of the Credit Card Act amends the EFTA and imposes certain 
restrictions on a person's ability to impose dormancy, inactivity, or 
service fees with respect to gift certificates, store gift cards, and 
general-use prepaid cards. In addition, the Credit Card Act generally 
prohibits the sale or issuance of such products if they are subject to 
an expiration date earlier than five years from the date of issuance of 
a gift certificate or the date on which funds were last loaded to a 
store gift card or general-use prepaid card.
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    \1\ Public Law 111-24, 123 Stat. 1734 (2009).
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    The Board must prescribe rules implementing EFTA Section 915 within 
nine months after enactment of the Credit Card Act. The gift card and 
related provisions become effective 15 months after enactment, or on 
August 22, 2010. See EFTA Section 915(d)(3); Section 403 of the Credit 
Card Act.

II. Background

    A gift card is a type of prepaid card that is designed to be 
purchased by one consumer and given to another consumer as a present or 
expression of appreciation or recognition. When provided in the form of 
a plastic card, a user of a gift card is able to access and spend the 
value associated with the device by swiping the card at a point-of-sale 
terminal, much as a person would use a debit card. Among the benefits 
of a gift card are the ease of purchase for the gift-giver and the 
recipient's ability to choose the item or items ultimately purchased 
using the card. According to one survey, over 95 percent of Americans 
have received or purchased a gift card.\2\
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    \2\ See Comdata, 2007 Adult Gift Card Study (available at: 
http://storedvalue.com/assets/pdf/study/2007/study_adult_gift_card_2007.pdf).
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    There are two distinct types of gift cards: closed-loop cards and 
open-loop cards. Closed-loop gift cards constitute the majority of the 
gift card market, both in terms of number of cards issued and the 
dollar value of the amounts loaded onto or spent with gift cards.\3\ 
These cards generally are accepted or honored at a single merchant or a 
group of affiliated merchants (such as a chain of book stores or 
clothing retailers) as

[[Page 60987]]

payment for goods or services. They have limited functionality and 
generally can only be used to make purchases at the merchant or group 
of merchants.
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    \3\ There are no consensus industry figures about the overall 
size of the prepaid card market. See Rachel Schneider, ``The 
Industry Forecast for Prepaid Cards, 2009,'' Center for Financial 
Services Innovation (March 2009) at 4 (available at: http://www.cfsinnovation.com/research-paper-detail.php?article_id=330539). 
According to the Federal Reserve's 2007 Electronic Payments Study, 
$36.6 billion was spent using closed-loop prepaid cards in 2006, 
compared to $13.3 billion spent using open-loop prepaid cards. See 
2007 Federal Reserve Electronic Payments Study 27-42 (March 2008). 
Industry studies using different methodologies suggest a larger 
prepaid card market, but nonetheless confirm that the closed-loop 
cards make up a substantial portion of the market. See, e.g., Tim 
Sloane, ``Sixth Annual Closed Loop Prepaid Market Assessment,'' 
Mercator Advisory Group (October 2009) (estimating that of the 
$247.7 billion total amount loaded across all prepaid segments in 
2008, 75 percent, or $187.24 billion, were loaded onto closed-loop 
cards, including closed-loop gift cards); ``Loyalty is Closed-Loop 
Gift Card's `Second Wind','' The Green Sheet, at 53 (May 29, 2009) 
(citing an Aite Group estimate of 904 million closed-loop gift cards 
sold in 2007).
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    Closed-loop gift cards are typically issued by a merchant, or by a 
card program sponsor or service provider working with a merchant, and 
not by a financial institution. These cards may be sold in a 
predenominated or consumer-specified amount at the merchant itself or 
distributed through other retail outlets, such as at grocery stores or 
drug stores. Generally, closed-loop gift cards may not be reloaded with 
additional value after card issuance. With closed-loop gift cards, the 
issuer typically does not collect any information regarding the 
identity of the gift card purchaser or the recipient.
    For merchant-issuers, gift cards have largely replaced paper-based 
gift certificates as a more cost-effective and efficient means of 
facilitating gift-giving by consumers. In addition to reducing costs 
associated with the issuance of paper certificates, electronic gift 
cards may also be less vulnerable to fraud or counterfeiting. Merchants 
benefit from the sale of items purchased with gift cards, as well as 
from additional spending by gift card recipients beyond the face amount 
on the card. Merchants may also derive revenue from the imposition of 
certain fees, such as from monthly maintenance or transaction-based 
fees or from interest earned from unused card balances.
    Open-loop gift cards differ in several respects from closed-loop 
gift cards. First, open-loop gift cards typically carry a card network 
brand logo (such as Visa, MasterCard, American Express, or Discover). 
Thus, they can be used at a wide variety of merchants that accept or 
honor cards displaying that brand. Second, open-loop gift cards are 
generally issued by financial institutions. Third, open-loop gift card 
transactions are processed over the debit or credit card networks. 
Fourth, open-loop gift cards may carry additional, and in some cases 
higher, fees than closed-loop gift cards as a result of higher 
compliance and customer service costs. Fifth, open-loop gift cards are 
more likely to offer the capability of being reloaded with additional 
value (reloadable) than are closed-loop gift cards.
    A consumer may obtain gift cards in several ways. Gift cards can be 
purchased at retail locations, by telephone, or on-line, and used 
either for the purchaser's own purposes or given to another consumer as 
a gift. In addition, gift cards can be received through a loyalty, 
award, or promotional program. For example, a merchant may distribute 
its own closed-loop gift card to encourage consumers to visit the store 
or for customer retention purposes, such as through a loyalty or 
frequent buyer program. Merchants and product manufacturers may also 
issue gift cards to consumers to provide a rebate for the consumer's 
purchase of a particular product instead of sending rebate checks. 
Employers may provide gift cards to their employees as a reward for 
good job performance.
    Concerns have been raised regarding the amount of fees associated 
with gift cards, the expiration dates of gift cards, and the adequacy 
of disclosures. Consumers who do not use the value of the card within a 
short period of time may be surprised to find that the card has expired 
or that dormancy or service fees have reduced the value of the card. 
Even where fees or terms are disclosed on or with the card, the 
disclosures may not be clear and conspicuous.
    At the State level, more than 40 States have enacted laws 
applicable to gift cards in some fashion. Most commonly, State gift 
card laws may restrict the circumstances under which dormancy, 
inactivity, or service fees may be charged and/or restrict the 
circumstances under which the card or funds underlying the card may 
expire.\4\ Other State laws simply require the disclosure of fees or 
expiration dates. Many States have applied abandoned property or 
escheat laws to funds remaining on gift cards, and some States require 
that consumers have the option of receiving cash back when the 
underlying balance falls below a certain amount. However, while all 
State gift card laws address closed-loop gift cards in some form, many 
State laws do not apply to open-loop bank-issued cards.\5\
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    \4\ See, e.g., Consumers Union, State Gift Card Consumer 
Protection Laws (available at: http://www.consumersunion.org/pub/core_financial_services/003889.html); National Conference of State 
Legislatures, Gift Cards and Gift Certificates Statutes and Recent 
Legislation (available at: http://www.ncsl.org/programs/banking/GiftCardsandCerts.htm).
    \5\ See, e.g., Ark. Code Sec.  4-88-704; Cal. Civil Code Sec.  
1749.45; Fla. Stat. Sec.  501.95; and Md. Commercial Code Ann. Sec.  
14-1320.
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III. Summary of Proposal

Restrictions on Dormancy, Inactivity, or Service Fees

    Under the proposed rule, no person may impose a dormancy, 
inactivity, or service fee with respect to 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 issuer or vendor must 
provide these disclosures to the purchaser before the certificate or 
card is purchased.

Expiration Date Restrictions

    The proposed rule would also provide 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.
    Two proposed alternative approaches are set forth to minimize 
potential confusion for consumers if the expiration date on a 
certificate or card and the expiration date for the underlying funds 
differ. The first alternative would prohibit the sale or issuance of a 
certificate or card that has a printed expiration date that is less 
than five years from the date of purchase. The second alternative would 
require policies or procedures to ensure that a consumer has a 
reasonable opportunity to purchase a certificate or card that has an 
expiration date that is at least five years from the date of purchase.
    The proposed rule would also require 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. In addition, the 
proposed rule would prohibit the imposition of any fees for replacing 
an expired certificate or card to ensure that consumers are able to 
access the underlying funds for the full five-year period.

Additional Disclosure Requirements Regarding Fees

    In addition to the statutory restrictions for dormancy, inactivity, 
or service fees, the proposed rule would require the disclosure of all 
other fees imposed in connection with a gift

[[Page 60988]]

certificate, store gift card, or general-use prepaid card. These 
disclosures would have to be provided on or with the certificate or 
card and disclosed prior to purchase. The proposed rule would also 
require the 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.

Exclusions

    Consistent with the statute, the proposed rule excludes certain 
card products from the definitions of gift certificate, store gift 
card, or general-use prepaid card. For example, cards, codes, or other 
devices that are issued in connection with a loyalty, award, or 
promotional program, or that are reloadable and not marketed or labeled 
as a gift card or gift certificate, would not be subject to the 
substantive restrictions on imposing dormancy, inactivity, or service 
fees, or on expiration dates. However, under the proposal, disclosures 
of all fees, including any dormancy, inactivity, or service fees, and 
any expiration date that may apply, would be required for certificates 
or cards issued through a loyalty, award, or promotional program.

IV. Legal Authority

    Section 401 of the Credit Card Act creates a new Section 915 of the 
EFTA and prohibits any person from charging dormancy, inactivity, or 
service fees with respect to a gift certificate, store gift card, or 
general-use prepaid card, as those terms are defined in the Act, unless 
there have been at least 12 months of inactivity with respect to the 
certificate or card, not more than one fee is charged in any given 
month, and certain disclosures regarding such fees are provided to the 
consumer. See EFTA Section 915(b); 15 U.S.C. 1693m(b). In addition, 
Section 401 of the Credit Card Act makes it unlawful for any person to 
sell or issue a gift certificate, store gift card, or general-use 
prepaid card that is subject to an expiration date, unless the 
expiration date is at least five years after the date on which a gift 
certificate is issued or five years after funds are last loaded on a 
store gift card or general-use prepaid card, and the terms of 
expiration are clearly and conspicuously disclosed. See EFTA Section 
915(c); 15 U.S.C. 1693m(c).
    Section 401(d)(1) of the Credit Card Act requires the Board to 
prescribe rules to carry out the new requirements. This section also 
gives the Board the authority to prescribe rules addressing the amount 
of dormancy, inactivity, or service fees that may be imposed, and the 
balance below which such fees may be assessed. See EFTA Section 
915(d)(1); 15 U.S.C. 1693m(d)(1). In addition, Section 401(d)(2) of the 
Credit Card Act requires the Board to determine the extent to which the 
individual definitions and provisions of the EFTA and Regulation E 
should apply to gift certificates, store gift cards, and general-use 
prepaid cards. See EFTA Section 915(d)(2); 15 U.S.C. 1693m(d)(2). 
Lastly, Section 402 of the Credit Card Act amends EFTA Section 920 to 
provide that the EFTA does not preempt any State laws that address 
dormancy, inactivity, or service fees or expiration dates for gift 
certificates, store gift cards, or general-use prepaid cards if such 
State laws provide greater consumer protection than the new gift card 
provisions.
    In addition to the statutory mandates set forth in the Credit Card 
Act, Section 904(a) of the EFTA authorizes the Board to prescribe 
regulations necessary to carry out the purposes of the title. The 
express purposes of the EFTA are to establish ``the rights, 
liabilities, and responsibilities of participants in electronic fund 
transfer systems'' and to provide ``individual consumer rights.'' See 
EFTA Section 902(b); 15 U.S.C. 1693. Section 904(c) of the EFTA further 
provides that regulations prescribed by the Board may contain any 
classifications, differentiations, or other provisions, and may provide 
for such adjustments or exceptions for any class of electronic fund 
transfers, that the Board deems necessary or proper to effectuate the 
purposes of the title, to prevent circumvention or evasion, or to 
facilitate compliance.

V. Section-by-Section Analysis

Section 205.4 General Disclosure Requirements; Jointly Offered Services

    Section 205.4 contains the general disclosure requirements under 
Regulation E, including provisions relating to the form of disclosure. 
Section 205.4(a)(1) provides that disclosures required by the 
regulation shall be clear and readily understandable, in writing, and 
in a form that the consumer may keep. To clarify that this standard is 
one of general application, the Board is proposing to revise Sec.  
205.4(a)(1) to provide that for certain disclosures required by the 
regulation, different disclosure standards may apply when specified in 
the rule.
    For example, as further discussed below, the disclosures for 
certain prepaid cards set forth in this proposal are subject to a 
``clear and conspicuous'' standard, consistent with new Section 915 of 
the EFTA, rather than the ``clear and readily understandable'' standard 
that generally applies under Regulation E. See proposed Sec.  205.20, 
discussed below. Similarly, under Sec.  205.11(c), notices provided by 
financial institutions to satisfy the error investigation requirements 
may be provided orally or in writing. See comment 11(c)-1.

Section 205.12 Relation to Other Laws

    Section 920 of the EFTA (as redesignated by the Credit Card Act) 
provides that the EFTA does not preempt any State laws relating to 
electronic fund transfers except to the extent that such laws are 
inconsistent with the EFTA's provisions. Section 920 further clarifies 
that a State law is not inconsistent with the EFTA if the State law 
provides greater protection for the consumer than under the Act. 
Accordingly, Section 920 effectively creates a Federal floor for the 
protections set forth in the Act (floor preemption). Section 205.12(b) 
of Regulation E implements this provision.
    The Credit Card Act amended Section 920 of the EFTA to apply the 
EFTA's existing preemption provisions to State laws that address 
``dormancy fees, inactivity charges or fees, service fees, or 
expiration dates of gift certificates, store gift cards, or general-use 
prepaid cards.'' See Section 402 of the Credit Card Act. Thus, State 
laws that provide greater protection for consumers than Title IV of the 
Credit Card Act as codified in the EFTA, are not preempted by the EFTA. 
The Board is proposing to amend Sec.  205.12(b) of Regulation E and 
comment 12(b)-1 to conform with the amendments to Section 920 of the 
EFTA made by the Credit Card Act.

Section 205.20 Requirements for Gift Cards and Gift Certificates

20(a) Definitions
    New EFTA Section 915(a)(2) generally defines the scope of gift 
cards and gift certificates that are subject to the Credit Card Act's 
restrictions on dormancy, inactivity, or service fees and the terms of 
expiration. Specifically, Section 915 applies to gift certificates, 
store gift cards, and general-use prepaid cards as those terms are 
defined in the statute. In addition, new EFTA Section 915(a)(1) defines 
a dormancy fee, inactivity charge or fee, and new EFTA Section 
915(a)(3) defines a service fee. See 15 U.S.C. 1693m(a). Proposed Sec.  
205.20(a) defines the following terms: gift certificate; store gift 
card; general-use prepaid card; loyalty, award, or promotional gift 
card; dormancy fee, inactivity charge or fee; and service fee.

[[Page 60989]]

    The proposed definitions of gift certificate, store gift card, and 
general-use prepaid card generally track the definitions set forth in 
the statute. However, the Board is proposing certain adjustments to the 
statutory definitions pursuant to its authority under EFTA Section 
904(c) to provide clarity and to harmonize key terms throughout the 
rule. In general, these adjustments are not intended to make 
substantive changes to the statutory definitions.
    As an initial matter, the Board notes that new EFTA Section 915 
does not use consistent terminology to describe the payment devices 
covered by the statute. For example, the statutory definition of a 
general-use prepaid card refers to a ``card or other payment code or 
device,'' while the statutory definition of a store gift card refers to 
an ``electronic promise, plastic card, or other payment code or 
device.''
    The Board does not believe that distinguishing the types of 
products covered by the rule by, for instance, the material that is 
used to produce a payment card would be consistent with the statute's 
overall purpose. The adoption of such distinctions would result in some 
gift card products being excluded from the rule altogether based on the 
type of material used to make the card. For example, if the definition 
of store gift card literally required a card to be made out of plastic, 
then a reloadable gift card that was made with a different material 
would neither be a store gift card nor fall under any of the other 
definitions of covered products.\6\
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    \6\ Products issued in paper form only are excluded under new 
EFTA Section 915(a)(2)(D)(v) and proposed Sec.  205.20(b)(5).
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    In addition, the exclusions in EFTA Section 915(a)(2)(D) apply to 
an ``electronic promise, plastic card, or payment code or device'' that 
meets certain specified criteria. The Board does not believe that an 
issuer that, for example, chooses to use non-plastic biodegradable 
materials to create a more environmentally-friendly product should be 
precluded from relying on an exclusion solely because its payment 
device is not made of plastic. Therefore, the proposed rule generally 
refers to ``cards, codes, or other devices'' to avoid such arbitrary 
distinctions and to provide consistency across the definitions.
    Proposed comment 20(a)-1 clarifies that the requirements of Sec.  
205.20 generally apply to all cards, codes, or other devices that meet 
the definition of gift certificate, store gift card, or general-use 
prepaid card, even if they are not issued in card form. That is, the 
rule would apply even if a physical card or certificate is not issued. 
The proposed comment clarifies that products not issued in card form, 
such as an account number or bar code that enables the consumer to 
access underlying funds, would be subject to Sec.  205.20 if they 
otherwise meet the definition of gift certificate, store gift card, or 
general-use prepaid card. Similarly, Sec.  205.20 would apply to a 
device with a chip or other embedded mechanism which links the device 
to stored funds, such as a mobile phone or sticker containing a 
contactless chip, if the device otherwise meets the definition of gift 
certificate, store gift card or general-use prepaid card.
    In addition, the term ``electronic promise'' is used in several 
places in the statute to refer to a type of payment mechanism or 
device. See EFTA Sections 915(a)(2)(B), (a)(2)(C), and (a)(2)(D). The 
Board does not believe, however, that there is a meaningful distinction 
between electronic promises and cards, codes, or other devices that can 
be used as payment mechanisms. Instead, the Board views an electronic 
promise as a commitment to pay that is itself manifested or represented 
by a ``card, code, or other device,'' rather than as a distinct payment 
mechanism. Proposed comment 20(a)-2 clarifies that the term 
``electronic promise'' means ``a person's commitment or obligation 
communicated or stored in electronic form made to a consumer to provide 
payment for goods or services for transactions initiated by the 
consumer.'' \7\ The proposed comment further provides that the promise 
is represented by a card, code, or other device that is issued or 
honored by the person, reflecting the person's commitment or obligation 
to pay. Thus, the proposal contemplates that the term ``card, code, or 
other device'' when used in the regulation also incorporates the 
statutory reference to ``electronic promises.'' For example, if a 
merchant issues a code that can be given as a gift and redeemed by the 
recipient in an on-line transaction for goods or services, that code 
represents an electronic promise by the merchant and would be a card, 
code, or other device covered by Sec.  205.20. See proposed comment 
20(a)-2.
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    \7\ See, e.g., UCC 3-106(a)(12) (defining ``promise'' as a 
``written undertaking to pay money signed by the person undertaking 
to pay. An acknowledgment of an obligation by the obligor is not a 
promise unless the obligor also undertakes to pay the obligation.'')
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    Last, the statutory definitions of ``gift certificate'' and ``store 
gift card'' refer to products that are ``issued in a specified 
amount.'' In contrast, the statutory definition of a ``general-use 
prepaid card'' refers to products that are ``issued in a requested 
amount.'' One way to reconcile the use of these different terms in the 
statute is to interpret ``specified'' as referring to cards that are 
issued in a predenominated amount (e.g., a $50 gift card), and to 
interpret ``requested'' as referring to a consumer-requested amount 
(e.g., where the consumer states the amount to load on a gift card). 
Such an interpretation would mean that gift certificates and store gift 
cards issued in a consumer-requested amount and general-use prepaid 
cards issued in a predenominated amount would be excluded from the 
rule. The Board does not believe that such a result would be consistent 
with the statute's purpose.
    The Board believes that consumers should receive the same 
protections when purchasing gift cards or gift certificates regardless 
of whether the amount on the card or certificate is determined by the 
issuer or the consumer. Thus, the Board is interpreting the statutory 
definitions of gift certificate, store gift card, and general-use 
prepaid card broadly to cover both predenominated and consumer-
designated certificates or cards. Therefore, the proposed rule uses the 
term ``specified'' consistently across all three defined product terms 
to capture all certificates or cards whether they are issued in 
predenominated amounts or in a consumer-requested, or variable load, 
amount.
    The Board notes that although the EFTA generally applies only to 
consumer accounts, the gift card provisions of the Credit Card Act do 
not expressly limit the scope of the new restrictions to cards issued 
for non-business purposes. The Board solicits comment on whether it is 
appropriate to limit the scope of the final rule so that it does not 
apply to cards issued for business purposes. Any such limitation, 
however, would presumably not exclude cards that are purchased by a 
business for the purposes of redistribution or resale to consumers for 
consumers to use. For example, a program manager may purchase gift 
cards directly from an issuing merchant and sell those cards through 
the program manager's retail outlets. Or, a corporation may give gift 
cards it has purchased directly from the issuing merchant to consumers 
pursuant to a reward or other incentive program. In such cases, the 
Board believes that because the end use of the gift card is for 
consumer purposes, the consumer protections provided by the Credit Card 
Act should apply, unless the card is otherwise excluded. (See EFTA 
Section 915(a)(2)(D) and proposed Sec.  205.20(b), discussed below.) 
Accordingly, given

[[Page 60990]]

that issuers would have to adopt controls and potentially monitor the 
distribution or sale of gift cards to ensure that the end use is for 
business purposes, comment is also requested regarding the overall 
utility of, or need for, such a scope provision in the final rule.
20(a)(1) Gift Certificate
    Proposed Sec.  205.20(a)(1) defines the term ``gift certificate'' 
as a card, code, or other device that is: (a) Issued to a consumer in a 
specified amount that may not be increased or reloaded in exchange for 
payment; and (b) redeemable upon presentation at a single merchant or 
an affiliated group of merchants for goods or services. The proposed 
definition generally tracks the definition set forth in the statute, 
but modifies the terms to simplify and clarify the definition. See EFTA 
Section 915(a)(2)(B).
    The term ``affiliated group of merchants''--as further discussed 
below under the definition of ``store gift card''--includes two or more 
merchants or other persons that are related by common ownership or 
common corporate control and share the same name, mark or logo. The 
term also includes two or more merchants or other persons that agree 
among each other to honor any card, code, or other device that bears 
the same name, mark, or logo (other than the mark or logo of a payment 
network) for the purchase of goods or services solely at such merchants 
or persons. See proposed comment 20(a)(2)-2.
20(a)(2) Store Gift Card
    Proposed Sec.  205.20(a)(2) defines the term ``store gift card'' as 
a card, code, or other device that is: (a) Issued to a consumer in a 
specified amount, whether or not that amount may be increased or 
reloaded by the cardholder, in exchange for payment; and (b) redeemable 
upon presentation at a single merchant or an affiliated group of 
merchants for goods and services. The proposed definition generally 
tracks the definition set forth in the statute, but modifies the terms 
to simplify and clarify the definition. See EFTA Section 915(a)(2)(C). 
Under the proposed rule, closed-loop cards generally would be 
considered ``store gift cards'' or ``gift certificates,'' unless one of 
the exclusions in Sec.  205.20(b), discussed below, applies.
    A card, code, or other device that meets the requirements in 
proposed Sec.  205.20(a)(2) qualifies as a ``store gift card,'' whether 
or not the cardholder may later add more funds to the card, code, or 
other device. Thus, because ``store gift card'' includes non-reloadable 
cards, codes, or other devices that are redeemable at single merchants 
or affiliated groups of merchants, proposed comment 20(a)(2)-1 
clarifies and illustrates by way of example that a gift certificate as 
defined in Sec.  205.20(a)(1) would be a type of store gift card.
    Proposed comment 20(a)(2)-2 provides guidance on the term 
``affiliated group of merchants.'' Under new EFTA Section 915(a)(2), 
both the definition of ``gift certificate'' and ``store gift card'' 
refer to certificates or cards that are redeemable at a single merchant 
or ``an affiliated group of merchants that share the same name, mark, 
or logo.'' The term ``affiliate'' is not defined within the statute. 
However, in other contexts, ``affiliate'' is used to describe a 
relationship between two or more companies that is defined by some form 
of common ownership or common corporate control by one of the 
companies. See, e.g., 12 CFR 222.3(b) (defining ``affiliate'' under the 
Board's Regulation V (Fair Credit Reporting)); 12 CFR 223.2 (defining 
``affiliate'' under the Board's Regulation W (Transactions Between 
Member Banks and Their Affiliates)). The Board believes that such a 
concept should similarly apply to the term ``affiliate'' when used in 
the proposed rules. Accordingly, the terms ``gift certificate'' and 
``store gift card'' generally include cards, codes, or other devices 
that are redeemable at some or all of the companies that are related by 
virtue of common ownership or common corporate control and that share 
the same name, mark, or logo. An ``affiliated group of merchants'' 
would also include franchisees because franchisees generally are 
subject to a common corporate set of policies or practices under the 
terms of their franchise licenses.
    Under some retail card programs, merchants that honor the same 
certificate or card may not be owned or otherwise controlled by the 
same parent company. For instance, two unrelated companies may be 
engaged in complementary businesses and agree to operate a common gift 
card program in which cardholders may use the same certificate or card 
at either of the two businesses. To illustrate, a movie theater chain 
and a restaurant chain may decide to operate a gift card program that 
enables cardholders to use the same gift card to pay for movie tickets 
and for a meal preceding or following the movie. While such companies 
would not be considered ``affiliates'' in other contexts, the Board 
believes that it is appropriate to treat such arrangements like gift 
card programs operated by retailers with the same parent company or 
under common corporate control. Accordingly, proposed comment 20(a)(2)-
2 provides that the term ``affiliated group of merchants'' would 
include two or more merchants or other persons that agree among each 
other, by contract or otherwise, to redeem cards, codes, or other 
devices bearing the same name, mark, or logo for purchases of goods or 
services solely at the establishments of such merchants or persons. 
(See also proposed comment 20(a)(3)-2 regarding mall cards, discussed 
below.) The proposed comment clarifies, however, that merchants or 
other persons would not be considered affiliated merely because they 
agree to accept a card that bears the mark, logo, or brand of a payment 
network. Thus, for example, a grocery store would not be considered 
affiliated with a hardware store merely because they both agree to 
accept Visa or MasterCard-branded cards.
    Proposed comment 20(a)(2)-3 addresses mall cards and cross-
references proposed comment 20(a)(3)-2, discussed below.
20(a)(3) General-Use Prepaid Card
    Proposed Sec.  205.20(a)(3) defines ``general-use prepaid card'' as 
a card, code, or other device that is: (a) Issued to a consumer in a 
specified amount, whether or not that amount may be increased or 
reloaded by the cardholder, in exchange for payment; and (b) redeemable 
upon presentation at multiple, unaffiliated merchants or service 
providers for goods or services, or usable at ATMs. The proposed 
definition generally tracks the definition set forth in the statute, 
but modifies the terms to simplify and clarify the definition. See EFTA 
Section 915(a)(2)(A). Under the proposed rule, open-loop cards 
generally are considered to be ``general-use prepaid cards,'' unless 
one of the exclusions in Sec.  205.20(b), discussed below, applies.
    Proposed comment 20(a)(3)-1 clarifies that a card, code, or other 
device is ``redeemable upon presentation at multiple, unaffiliated 
merchants'' if, for example, the merchants agree to honor the card, 
code, or device if it bears the mark, logo, or brand of a payment 
network, pursuant to the rules of the payment network.
    One popular form of gift card is a mall gift card, which is 
generally intended to be used or redeemed at participating retailers 
located within the same shopping mall. In some cases, however, the mall 
card may also be network-branded which permits the card to be used at 
any retailer that accepts that card brand, including retailers located 
outside of the mall. Proposed comment

[[Page 60991]]

20(a)(3)-2 provides that a mall card could be considered a store gift 
card or a general-use prepaid card depending on the locations in which 
the card may be redeemed. That is, if use of the mall card is limited 
to the retailers at the associated shopping mall, the card is more 
likely to be considered a store gift card. If the mall card also 
carries the brand of a payment network and can be used at any retailer 
accepting that brand, the card would be considered a general-use 
prepaid card. Regardless, the substantive and disclosure requirements 
of Sec.  205.20 would apply to mall cards whether they are considered 
store gift cards or general-use prepaid cards.
20(a)(4) Loyalty, Award, or Promotional Gift Card
    New EFTA Section 915(a)(2)(D)(iii) excludes an electronic promise, 
plastic card, or payment code or device from the definitions of ``gift 
certificate,'' ``store gift card,'' or ``general-use prepaid card'' if 
it is a loyalty, award, or promotional gift card, as such term is 
defined by the Board. Proposed Sec.  205.20(a)(4) generally defines the 
term ``loyalty, award, or promotional gift card'' as a card, code, or 
other device that: (a) Is issued in connection with a loyalty, award, 
or promotional program; (b) is redeemable upon presentation at one or 
more merchants for goods or services, or usable at ATMs; and (c) 
provides certain disclosures about any fees and expiration dates that 
may apply to the card, code, or other device.
    As an initial matter, the Board notes that the proposed definition 
generally applies to any card, code, or other device issued pursuant to 
a loyalty, award, or promotional program, regardless of whether the 
consumer has provided any form of payment or other value to obtain the 
card. The proposed definition covers, for example, gift cards mailed to 
a consumer as a rebate on a product that a consumer has purchased in 
response to a sales promotion, and gift cards given by a merchant to 
reward frequent customers. The definition also covers cards provided by 
employers to reward job performance. Proposed comment 20(a)(4)-1 
provides examples of loyalty, award, or promotional programs.
    Under proposed Sec.  205.20(b)(3), further discussed below, if a 
card, code, or other device is deemed to be a loyalty, award, or 
promotional gift card, it would not be subject to the substantive 
restrictions on imposing dormancy, inactivity or service fees, or the 
requirement to have expiration dates of at least five years. 
Accordingly, to mitigate potential consumer surprise from unexpected 
fees or expiration dates for these cards, proposed Sec.  
205.20(a)(4)(iii) provides that in order to qualify as a ``loyalty, 
award, or promotional gift card,'' certain disclosures regarding the 
fees and expiration dates applying to such cards must also be provided 
to the consumer. These disclosures are discussed in more detail below 
under Sec.  205.20(b)(3).
20(a)(5) Dormancy or Inactivity Fee
    New section 915(a)(1) of the EFTA defines a ``dormancy fee,'' or an 
``inactivity charge or fee'' as ``a fee, charge, or penalty for non-use 
or inactivity of a gift certificate, store gift card, or general-use 
prepaid card.'' Proposed Sec.  205.20(a)(5) implements this definition 
with non-substantive wording modifications to improve readability. 
Because the Board believes the terms ``charge'' and ``penalty'' are 
synonymous with ``fee'' as used in this definition, the proposal 
simplifies the definition by not including the references to ``charge'' 
or ``penalty'' used in the statute.
20(a)(6) Service Fee
    New EFTA Section 915(a)(3)(A) defines a ``service fee'' as ``a 
periodic fee, charge, or penalty for holding or use of a gift 
certificate, store gift card, or general-use prepaid card.'' Proposed 
Sec.  205.20(a)(6) implements this definition using substantially the 
same language as the statute. Because the Board believes the terms 
``charge'' and ``penalty'' are synonymous with ``fee'' as used in this 
definition, the proposal simplifies the definition by not including the 
statutory references to ``charge'' or ``penalty'' used in the statute.
    In addition, proposed comment 20(a)(6)-1 clarifies that a periodic 
fee is a fee that may be imposed from time to time for holding or using 
a gift certificate, store gift card, or general-use prepaid card. Such 
fees may include a monthly maintenance fee, a transaction fee, a reload 
fee, or a balance inquiry fee, whether or not the fee is waived for a 
certain period of time or is only imposed after a certain period of 
time. Transaction fees include, for example, fees imposed each time a 
transaction is conducted with the certificate or card and foreign 
transaction fees.
    The Board considered an alternative interpretation of a ``periodic 
fee'' as a fee that is imposed at regular intervals, which would 
include a monthly maintenance fee, but not transaction fees or reload 
fees that are triggered by consumer activity. The Board notes, however, 
that the statutory definition of ``service fee'' refers to the ``use'' 
of a gift certificate, store gift card, or general-use prepaid card. 
See new EFTA Section 915(a)(3)(A) (15 U.S.C. 1693m(a)(3)(A)). 
Therefore, the Board believes that Congress intended to also capture 
consumer-initiated fees such as transaction fees and reload fees in the 
definition of ``service fee.'' Moreover, the Board is concerned that a 
narrow interpretation of ``service fee'' would lead to circumvention by 
issuers and result in a shift in fee structures from fees imposed at 
regular intervals to fees that are imposed for a transaction or service 
associated with the certificate or card. The Board believes that 
interpreting the term ``service fee'' broadly, and thus limiting the 
imposition of such fees, will improve the transparency and 
predictability of costs to the consumer.
    Consistent with new EFTA Section 915(a)(3)(B), proposed comment 
20(a)(6)-1 also clarifies that a one-time initial issuance fee is not a 
service fee. Proposed comment 20(a)(6)-1 also provides examples of 
other one-time fees that are not service fees, including cash-out fees.
20(b) Exclusions
    New EFTA Section 915(a)(2)(D) states that the terms ``general-use 
prepaid card,'' ``gift certificate,'' and ``store gift card'' do not 
include an electronic promise, plastic card, or payment code or device 
that falls into one of six specified categories. See 15 U.S.C. 
1593m(a)(2)(D). For example, reloadable cards that are not marketed or 
labeled as a gift card or gift certificate are excluded from the 
statutory definitions. Similarly, prepaid cards that are not marketed 
to the general public are excluded from the statutory definitions. 
Thus, under the statute, an excluded promise, card, code, or device is 
not subject to the substantive restrictions regarding when a dormancy, 
inactivity, or service fee may be imposed, or on expiration dates. 
These excluded products also are not subject to the disclosure 
requirements in the statute.
    Proposed Sec.  205.20(b) implements the statutory exclusions and 
provides that the terms ``gift certificate,'' ``store gift card,'' and 
``general-use prepaid card'' do not include any cards, codes, or other 
devices that meet any of the six conditions specified in the statute. 
As noted above, the proposed rule uses the term ``card, code, or other 
device,'' instead of the term ``electronic promise, plastic card, or 
payment code or device'' for clarity and no substantive difference is 
intended.
    Proposed comment 20(b)-1 provides guidance on the effect of meeting 
any of the specified exclusions. The comment

[[Page 60992]]

states that an excluded card, code, or other device is not subject to 
any of the substantive restrictions and disclosure requirements 
regarding the imposition of dormancy, inactivity, or service fees, or 
expiration dates. The proposed comment also provides that the 
additional disclosures in proposed Sec.  205.20(f) regarding other fees 
imposed in connection with a card, code, or other device do not apply 
to an excluded card, code, or other device.\8\
---------------------------------------------------------------------------

    \8\ See, however, proposed Sec.  205.20(a)(4)(iii) with respect 
to loyalty, award, or promotional gift cards.
---------------------------------------------------------------------------

    Proposed comment 20(b)-2 clarifies that a card, code, or other 
device may qualify for one or more exclusions. For example, a 
corporation may award its employees with a gift card that is marketed 
solely to businesses for incentive-related purposes. Under this 
example, the card, code, or other device may qualify for the exclusion 
for loyalty, award, or promotional gift cards, or for the exclusion for 
cards, codes, or other devices not marketed to the general public. Even 
if a card, code, or other device does not qualify for a particular 
exclusion, it may still fall outside the rule under a different 
exclusion. Thus, for example, if the gift card awarded by the 
corporation is of a type that can also be purchased directly from a 
merchant, the gift card may fall outside coverage under the rule 
because it is a loyalty, award, or promotional gift card (provided that 
certain disclosures are provided with the card as proposed under Sec.  
205.20(a)(4)(iii)), even though the card would not qualify as a card 
that is not marketed to the general public because it can also be 
obtained through retail channels. See proposed Sec.  205.20(b)(4), 
discussed below.
    The six specific exclusions are discussed below.
20(b)(1) Usable Solely for Telephone Services
    Proposed Sec.  205.20(b)(1) implements the exclusion for cards, 
codes, or other devices that are usable solely for telephone services. 
See EFTA Section 915(a)(2)(D)(i). Proposed comment 20(b)(1)-1 contains 
examples of products that fall within this exclusion, such as prepaid 
cards for long-distance telephone service and prepaid cards for 
wireless telephone service. The proposed comment further clarifies that 
this exclusion also includes prepaid products that may be used for 
other services analogous in function to a telephone, such as prepaid 
cards for voice over Internet protocol (VoIP) access time.
    The Board notes that mobile phones today are capable of a number of 
different functions in addition to voice communications, including 
providing consumers the ability to send text messages and to access the 
Internet. Accordingly, the Board solicits comment on whether it should 
exercise its authority under EFTA Section 904 to expand the proposed 
exclusion to cover other prepaid cards that may be redeemed for similar 
or related technology services, such as prepaid cards used to obtain 
mobile broadband or Internet access time. See, e.g., N.J. Rev. Stat. 
Sec.  56:8-110 (excluding prepaid telecommunications and technology 
cards from the definitions of ``gift card'' and ``gift certificate''). 
The Board is concerned that interpreting the exclusion narrowly may 
have the unintended effect or reducing the availability or variety of 
prepaid telephone certificates or cards in the market.

20(b)(2) Reloadable and Not Marketed or Labeled as a Gift Card or Gift 
Certificate

    Proposed Sec.  205.20(b)(2) implements the exclusion for cards, 
codes, or other devices that are reloadable and not marketed or labeled 
as a gift card or gift certificate. See EFTA Section 915(a)(2)(D)(ii).
    Consistent with the statute, the card, code, or other device must 
be both reloadable and not marketed or labeled as a gift card or gift 
certificate to qualify for the exclusion. Thus, a non-reloadable card 
is not excluded, even if it is not marketed or labeled as a gift card 
or gift certificate, unless a different exclusion applies. Similarly, a 
reloadable card that is marketed as a gift card or gift certificate 
does not qualify for the exclusion. Proposed comment 20(b)(2)-1 
provides that a card, code, or other device is ``reloadable'' if it has 
the capability of having more funds added by a consumer after the 
initial purchase or issuance.
    Proposed comment 20(b)(2)-2 clarifies the meaning of the term 
``marketed or labeled as a gift card or gift certificate.'' Under the 
proposed comment, the term means directly or indirectly offering, 
advertising, or otherwise suggesting the potential use of a card, code, 
or other device as a gift for another person. Moreover, whether the 
exclusion applies does not depend on the type of entity that is making 
the promotional message. For example, a card may be marketed or labeled 
as a gift card or gift certificate if anyone (other than the purchaser 
of the card),\9\ including the issuer, the retailer, the program 
manager that may distribute the card, or the payment network on which a 
card is used, promotes the use of the card as a gift card or gift 
certificate. A certificate or card, including a general-purpose 
reloadable card, may also be deemed to be marketed or labeled as a gift 
card or gift certificate even if it is primarily marketed for another 
purpose. For example, a reloadable network-branded card would be 
marketed or labeled as a gift card or gift certificate if the issuer 
principally advertises the card as a less costly alternative to a bank 
account but promotes the card in a television, radio, newspaper, or 
Internet advertisement, or on signage as ``the perfect gift'' during 
the holiday season.
---------------------------------------------------------------------------

    \9\ Thus, a card would not be deemed to be marketed or labeled 
as a gift card or gift certificate solely because the purchaser 
gives the card to another consumer as a ``gift.''
---------------------------------------------------------------------------

    Proposed comment 20(b)(2)-3 provides positive and negative examples 
of the term ``marketed or labeled as a gift card or gift certificate.'' 
Positive examples of marketing or labeling as a gift card or gift 
certificate include displaying the word ``gift'' or ``present,'' 
displaying a congratulatory message, and incorporating gift-giving or 
celebratory imagery or motifs on the card, certificate or accompanying 
material, such as documentation, packaging and promotional displays. In 
contrast, a card, code, or other device is not marketed or labeled as a 
gift card or gift certificate if the issuer, vendor, or other person 
represents that the card, code, or other device can be used as a 
substitute for a checking, savings, or deposit account, as a budgetary 
tool, or to cover emergency expenses. Similarly, a card, code, or other 
device is not marketed as a gift card or gift certificate if it is 
promoted as a substitute for travelers' checks or cash for personal 
use, or promoted as a means of paying for a consumer's health-related 
expenses. See proposed comment 20(b)(2)-3. The Board solicits comment 
on whether additional guidance on marketing is necessary to provide 
clarity with respect to the activities that may trigger coverage under 
the rule and the activities that would not.
    As discussed above, a gift card may be sold directly to the 
consumer by a merchant at the merchant's store. In this type of 
arrangement, the merchant is typically the primary party involved in 
issuing the card and operating the card program. As such, the issuer 
can be expected to have substantial control over all facets of the card 
program, including how the card is sold or marketed.

[[Page 60993]]

    In other cases, a gift card may be sold to consumers through 
another merchant or retailer, such as a grocery store or a drug store, 
on display racks that may make retail gift cards available alongside 
gift cards from other merchants and other types of prepaid cards, 
including general-purpose reloadable cards and telephone cards. In this 
type of arrangement, multiple parties are generally involved in the 
card distribution process. These parties may include: an issuer 
(whether it is a merchant or a bank); a program manager who works with 
issuers to administer any or all aspects of a card program, including 
transaction processing, distribution, and marketing; and a seller or 
distributor of the card.\10\ A seller or distributor of the card can be 
an issuer, a program manager, or another party, such as a shopping mall 
or a retailer. In these arrangements, responsibilities for operating 
the program, including compliance with applicable laws or payment 
network rules, are generally allocated by contract.
---------------------------------------------------------------------------

    \10\ In addition to these parties, a processor may work with the 
issuer and the program manager to process card transactions, and in 
some cases provide Web site and telephone customer service. For 
open-loop card programs, the payment network operates the network 
and establishes operating rules for card issuers, processors, and 
merchants or ATMs that accept the card.
---------------------------------------------------------------------------

    When multiple parties are involved in a card program, the issuer 
may not play a significant role in the card distribution process and 
thus may have less control over how the card is displayed or marketed 
at the locations where the card is sold. An exclusion that depends upon 
how a card is marketed therefore poses substantial compliance risk for 
an issuer that cannot fully control how its prepaid cards are marketed 
to consumers. For example, where a card is sold in a substantial number 
of retail outlets, the card issuer cannot verify in every instance how 
the card is displayed or marketed at each retail outlet to ensure that 
it is not being marketed as a gift card or gift certificate through 
signage, advertisements, or otherwise.
    To address this issue, proposed comment 20(b)(2)-4 provides that 
the exclusion for a card, code, or other device that is reloadable and 
not marketed or labeled as a gift card or gift certificate applies if 
the individual card, code, or other device is not marketed or labeled 
as a gift card or gift certificate and if entities subject to the rule 
maintain policies and procedures reasonably designed to avoid such 
marketing. The proposed comment provides illustrative examples of 
procedures that would qualify and not qualify for the exclusion for 
reloadable cards, codes, or other devices that are not marketed or 
labeled as gift cards or gift certificates.
    Under the first example, an issuer or program manager distributes a 
general-purpose reloadable card through retailers and enters into a 
contract with the retailer to establish the terms and conditions under 
which the card will be sold and marketed at the retailer. The contract 
includes restrictions prohibiting the general-purpose reloadable card 
from being sold or otherwise marketed as a gift card or gift 
certificate, and requirements for policies and procedures to regularly 
monitor or otherwise verify that the cards are not being sold or 
marketed as such. The issuer or program manager then sets up one 
promotional display at the retailer for gift cards and another 
physically separated display for excluded products under proposed Sec.  
205.20(b), including the general-purpose reloadable cards, such that a 
reasonable consumer would not believe that the excluded cards are gift 
cards. Under these circumstances, the exclusion in Sec.  205.20(b)(2) 
applies even if a retail clerk inadvertently stocks or places some of 
the general-purpose reloadable cards on the gift card display because 
the issuer or program manager maintains policies and procedures 
reasonably designed to avoid the marketing of the general-purpose 
reloadable card as a gift card or gift certificate. See proposed 
comment 20(b)(2)-4.i.
    In the second example, the same facts apply, except that the issuer 
or program manager has set up a single promotional display at the 
retailer on which a variety of prepaid cards, including store gift 
cards, general-purpose reloadable cards, and wireless telephone cards, 
are sold. A sign stating ``Gift Cards'' appears prominently at the top 
of the display. Under proposed comment 20(b)(2)-4.ii, any general-
purpose reloadable cards sold under such circumstances would not 
qualify for the exclusion in proposed Sec.  205.20(b)(2) because the 
issuer or program manager does not maintain policies and procedures 
reasonably designed to avoid the marketing of the general-purpose 
reloadable cards as gift cards or gift certificates.
    The Board solicits comment on whether the proposed comment provides 
sufficient guidance regarding procedures that could enable an issuer, 
program manager, or other covered entity to comply with the rule with 
respect to an excluded product under proposed Sec.  205.20(b)(2). In 
particular, comment is requested on practical issues that may arise in 
a retail environment, for example, in areas where there may not be 
sufficient space for covered and non-covered products to be separately 
displayed, such as a checkout lane. Commenters are urged to provide 
specific examples of measures that may be utilized to ensure that a 
reasonable consumer would not believe that a card that would otherwise 
be excluded, such as a general-purpose reloadable card, is a gift card 
or gift certificate.
    Some general-purpose reloadable cards that are not intended to be 
marketed as a gift card, but rather as an alternative to a bank account 
(or account substitute), such as for the unbanked, may be initially 
sold as a non-reloadable open-loop card. After the card is purchased, 
the cardholder may call the issuer to register the card. Once the 
issuer has obtained the cardholder's personal information, a new 
personalized, reloadable card may be sent to the cardholder.
    The Board understands that under one model, the cardholder may use 
the temporary non-reloadable card to conduct transactions immediately 
after card purchase and up until the card is registered by the consumer 
and replaced with the personalized, reloadable card. Under another 
model, the temporary non-reloadable card may not be used by the 
consumer to make purchases until the consumer calls to register the 
card. Under the second model, the temporary card can be used after 
registration until the personalized, reloadable card arrives in the 
mail and is activated by the cardholder.
    Under either model, the temporary card would not appear to qualify 
for the reloadable and not marketed as a gift card or gift certificate 
exclusion because it is non-reloadable. If the rule were to provide 
that such products were to fall within the exclusion notwithstanding 
the issuance of the initial non-reloadable card, then consumers that 
elect not to register the card (and therefore do not obtain a 
reloadable card) would not be given the statutory protections under the 
Credit Card Act. Conversely, if the rule were to provide that such 
products do not qualify for the exclusion at any point even if the card 
is ultimately replaced by a reloadable card, then the exclusion in EFTA 
Section 915(a)(2)(D)(ii) and proposed Sec.  205.20(b)(2) would 
effectively be eliminated for most, if not all, general-purpose 
reloadable cards, given existing business models and other regulatory 
considerations.
    Under a third approach, the restrictions on assessing dormancy, 
inactivity, or service fees, and on expiration dates could be applied 
solely to the initial non-reloadable card, but

[[Page 60994]]

not to the reloadable replacement card. While the third approach may 
provide certain flexibility for some issuers, the Board is concerned 
that consumers may be confused or surprised when they receive new terms 
regarding dormancy, inactivity, or service fees and expiration dates 
for the reloadable card that differ from the terms previously disclosed 
at the initial purchase. Given these considerations, the Board solicits 
comment on the appropriate treatment of these products.
20(b)(3) Loyalty, Award, or Promotional Gift Card
    Proposed Sec.  205.20(b)(3) implements the exclusion for cards, 
codes, or other devices for loyalty, award, or promotional gift cards. 
See EFTA Section 915(a)(2)(D)(iii). As discussed above, proposed Sec.  
205.20(a)(4) generally defines a ``loyalty, award, or promotional gift 
card'' as a card, code, or other device that is issued in connection 
with a loyalty, award, or promotional program.
    In contrast to gift cards purchased at a store, loyalty, award, and 
promotional gift cards typically are not funded by direct payment from 
the consumer, but instead are funded by the entity sponsoring the card 
program, such as a merchant, an employer, or a company. Prepaid cards 
issued through such programs may serve as cost-effective substitutes 
for traditional means of distributing funds through a promotion, such 
as rebate checks, vouchers, or cash awards.
    Much like rebate checks, vouchers, and cash awards, gift cards 
distributed through a loyalty, award, or promotional program are 
typically redeemable for a limited period of time. Loyalty, award, or 
promotional gift cards thus generally carry shorter expiration dates 
compared to gift cards purchased through retail channels.
    From a consumer's perspective, consumers who receive a gift card 
redeemable at one merchant as part of a loyalty, award, or promotional 
program may be surprised to find that the fees and expiration date on 
the card differ substantially from a card that they may have purchased 
directly from that same merchant. Improved disclosure of these terms 
for cards subject to the exclusion may help reduce consumer surprise or 
confusion.
    Consistent with the statutory exclusion in EFTA Section 915(a)(2), 
the proposed rule does not impose substantive restrictions on dormancy, 
inactivity, or service fees, or on expiration dates, for cards, codes, 
or other devices issued pursuant to a loyalty, award, or promotional 
program. Nonetheless, the Board believes that clear and conspicuous 
disclosures of the terms that apply to a loyalty, award, or promotional 
gift card are necessary to help consumers avoid surprise from 
unexpected dormancy, inactivity, or service fees or from short 
expiration dates.
    Accordingly, the Board is proposing to exercise its authority under 
new EFTA Section 915(a)(2)(D)(iii) to define loyalty, award or 
promotional gift cards to require that consumers are given clear and 
conspicuous disclosures about any fees, including dormancy, inactivity, 
or service fees, or expiration dates, that may apply when they receive 
a gift card through a loyalty, award, or promotional program. This 
requirement would be implemented in proposed Sec.  205.20(a)(4)(ii). 
Thus, in order to be deemed a ``loyalty, award, or promotional gift 
card,'' and therefore qualify for the exclusion in proposed Sec.  
205.20(b)(3), the card, code, or other device must set forth 
disclosures regarding any fees and expiration dates that may apply to 
the card, code, or device. While disclosures regarding dormancy, 
inactivity, or service fees, expiration dates, and a toll-free number 
and Web site for additional information must be on the card, code or 
other device, disclosures regarding other fees may accompany the card, 
code, or other device. See also proposed Sec. Sec.  205.20(d)(2), 
(e)(2), and (f), discussed below. The proposed rule is intended to 
strike a balance between the competing considerations of enabling 
companies to manage the costs of providing consumers gift cards in 
connection with loyalty, award, or promotional programs, and limiting 
potential consumer confusion or surprise arising from the different 
terms that may apply to such cards.
20(b)(4) Not Marketed to the General Public
    Proposed Sec.  205.20(b)(4) implements the exclusion for cards, 
codes, or other devices that are not marketed to the general public. 
See EFTA Section 915(a)(2)(D)(iv). Whether a card is ``marketed to the 
general public'' depends on the facts and circumstances, but the term 
generally describes cards, codes, or other devices that are offered, 
advertised or otherwise promoted to the general public. See proposed 
comment 20(b)(4)-1. A card, code, or other device may be marketed to 
the general public regardless of the advertising medium, including 
television, radio, newspaper, the Internet, or signage.
    In determining whether the exclusion applies to a particular card, 
code, or other device, proposed comment 20(b)(4)-1 provides that a 
number of factors must be considered, including the means or channel 
through which the card, code, or device may be obtained by a consumer, 
the subset of consumers that are eligible to obtain the card, code or 
device, and whether the availability of the card, code, or device is 
advertised or otherwise promoted in the marketplace. Thus, the Board 
does not view the method of distribution by itself as dispositive in 
determining whether a card, code, or other device is marketed to the 
general public.
    Proposed comment 20(b)(4)-2 provides examples illustrating the 
exclusion. For instance, a merchant may sell its gift cards at a 
discount to a business, either directly or indirectly through a third 
party. The business that purchases the cards may give them to employees 
or loyal consumers as incentives or rewards. In determining whether the 
gift card is marketed to the general public, the merchant-issuer must 
consider whether the card is of a type that is advertised or made 
available to consumers generally or can be easily obtained elsewhere. 
If the card may also be purchased through retail channels, the 
exclusion in Sec.  205.20(b)(4) does not apply, even if the consumer 
obtained the card as an incentive or reward. See proposed comment 
20(b)(4)-2.i. In these cases, consumers could be confused when they 
receive gift cards that appear substantially similar to those that they 
could have purchased directly from a merchant, but contain different 
terms and conditions, such as a shorter expiration date. Of course, 
other exclusions under the proposed rule, such as the exclusion for 
cards issued in connection with a loyalty, award, or promotional 
program, may apply to such cards. See proposed Sec.  205.20(b)(3).
    Similarly, the Board has also considered whether cards issued or 
sold by a business pursuant to a marketing campaign that targets a 
specific subset of consumers would fall within the exclusion. The Board 
is concerned that a broad interpretation of the exclusion for cards not 
marketed to the general public would create a loophole and undermine 
the protections afforded to consumers under the rule. For example, a 
national retail chain could decide to market its gift cards only to 
members of its frequent buyers program. However, if any member of the 
general public may become a member of the program, the general public 
would still be able to obtain the cards. Thus, the Board believes such 
cards would be covered by the rule in those circumstances, unless 
another exclusion applies. See proposed comment 20(b)(4)-2.ii. 
Similarly, a reloadable card advertised

[[Page 60995]]

to teenagers to help them manage their everyday expenses and for 
emergencies, or marketed to parents to enable them to monitor spending 
would be a card marketed to the general public. See proposed comment 
20(b)(4)-2.iii.
    In contrast, where the availability of the card itself is not 
advertised or otherwise promoted, but rather, is merely used as the 
means through which funds are delivered to a consumer, the Board 
believes the card is not marketed to the general public. Proposed 
comment 20(b)(4)-2 includes four examples of cards that may fall within 
the exclusion depending on the circumstances: (a) A card containing 
insurance proceeds provided by an insurance company to a customer to 
settle a claim; (b) a card containing travel expenses or per diem funds 
provided by a business to an employee; (c) a card containing store 
credit provided by a retailer to a customer following a merchandise 
return if the card states that it is issued for store credit; and (d) a 
card containing tax refunds provided by a tax preparer to a customer. 
See proposed comments 20(b)(4)-2.iv-.vii.
    Whether a non-reloadable tax refund card is marketed to the general 
public will depend upon the facts and circumstances. For example, if a 
tax preparer merely provides the prepaid card as a mechanism for 
providing a tax refund to a consumer, and does not advertise or 
otherwise promote the ability to receive a tax refund through a prepaid 
card, the card would be excluded because it is not marketed to the 
general public. However, if the tax preparer engages in a marketing 
campaign that touts the ability of a consumer to receive a prepaid card 
for faster access to their tax refund proceeds, the tax refund card 
would not be exempt under this exclusion. See proposed comment 
20(b)(4)-2.vii.
20(b)(5) Issued in Paper Form Only
    Proposed Sec.  205.20(b)(5) sets forth the exclusion for cards, 
codes, or other devices that are issued in paper form only. See EFTA 
Section 915(a)(2)(D)(v). As explained in proposed comment 20(b)(5)-1, 
the exclusion applies where the sole means of issuing the card, code, 
or other device is by paper. Examples of excluded paper gift 
certificates or cards include paper certificates distributed by 
restaurants or spas that are redeemable for a specific service or a 
specified dollar amount, and paper vouchers valid for tickets or 
events.
    To prevent potential circumvention of the rule, the proposed 
commentary explains that the exclusion does not apply simply because a 
card, code, or other device is reproduced or otherwise printed on 
paper. For example, a bar code or card or certificate number sent 
electronically to a consumer and redeemable for goods or services is 
not issued in paper form, even if it may be reproduced or otherwise 
printed on paper by the consumer.\11\ Similarly, Sec.  205.20(b)(5) 
would not apply where an on-line retailer electronically mails a 
certificate redeemable for goods or services to a consumer, which the 
consumer could print out on a home printer. In these circumstances, 
although the consumer might hold a paper facsimile of the card, code, 
or other device, the exclusion does not apply because the information 
necessary to redeem the value was initially issued in electronic form.
---------------------------------------------------------------------------

    \11\ An issuer may, however, replace a gift certificate that was 
initially issued in paper form only with a plastic card or 
electronic code (for example, to replace a lost paper certificate) 
without falling outside the exclusion in Sec.  205.20(b)(5).
---------------------------------------------------------------------------

    The proposal does not, however, preclude a paper certificate 
bearing a bar code or account number that is given to the consumer at 
the time of purchase from qualifying for the exclusion. For example, a 
retailer may generate a bar code on a paper certificate at the time of 
purchase that enables the retailer to scan the certificate and maintain 
a record of the certificate electronically, rather than enter the 
information in a ledger. Because the bar code is not issued to the 
consumer in any form other than on the paper given to the consumer, 
this certificate would qualify for the exclusion for cards, codes, or 
other devices issued in paper form.
    Comment is requested regarding whether this aspect of the proposal 
creates an undue risk of circumvention. For example, a paper 
certificate or card that is encoded with a magnetic stripe might 
qualify for the exclusion. Other than the material on which the 
magnetic stripe is printed or produced, however, there is no meaningful 
distinction between a plastic card with a magnetic stripe and a paper 
certificate or card with a magnetic stripe encoded on the paper.
20(b)(6) Redeemable Solely for Admission to Events or Venues
    Proposed Sec.  205.20(b)(6) excludes cards, codes, or other devices 
that are redeemable solely for admission to events or venues at a 
particular location or group of affiliated locations, or to obtain 
goods or services, in conjunction with such admission, at the event or 
venue, or at specific locations affiliated with and in geographic 
proximity to the event or venue. See EFTA Section 915(a)(2)(D)(vi).
    Under the proposed rule, the exclusion in Sec.  205.20(b)(6) is 
generally limited to cards, codes, or other devices that do not state a 
specific monetary value but instead are redeemable for an admission to 
an event or venue, such as a ticket to a sporting event or a pass to 
enter an amusement park. In addition, the exclusion applies to cards, 
codes, or other devices that entitle consumers to obtain goods or 
services, in conjunction with admission to an event or venue. See EFTA 
Section 915(a)(2)(D)(vi). For example, the consumer might purchase a 
certificate or card that entitles the recipient to one ticket to an 
amusement park plus a dollar amount that can be spent on concessions at 
the park. Consistent with the statute, the proposed exclusion in Sec.  
205.20(b)(6) would also cover circumstances where the consumer may 
obtain goods or services at specific locations affiliated with and in 
geographic proximity to the event or venue in conjunction with 
admission. For example, a certificate or card may enable a consumer to 
gain admission to an amusement park and to receive a souvenir of the 
occasion at a retailer affiliated with the park and located within or 
nearby the park.
    While the exclusion would apply to cards, codes, or other devices 
that are redeemable for admission to an event or venue, and for goods 
or services purchased in conjunction with that admission, the exclusion 
does not cover cards, codes, or other devices issued in a specified 
monetary value that could be applied toward such admission. For 
example, a merchant with an affiliated amusement park could issue a $25 
gift card to a consumer that can be redeemed by the recipient to 
purchase goods at any of the merchant's retail outlets and its on-line 
store. Under the terms of the prepaid card program, however, the 
merchant could also allow the card to be provided as a form of payment 
to purchase tickets at the amusement park.
    The Board is concerned that permitting the exclusion to apply in 
these circumstances would create opportunities for circumvention 
because an issuer could simply list the purchase of tickets at the 
amusement park as one of several permitted uses of a gift card to avoid 
the consumer protections provided by the Credit Card Act. Accordingly, 
the proposed rule would not apply the exclusion to a card that can be 
redeemed in a specified amount towards admission to an event or venue. 
In this regard, the Board notes that the statute refers to cards, 
codes, or other devices that are redeemable solely for

[[Page 60996]]

admission to events or venues at a particular location or group of 
affiliated locations. See EFTA Section 915(a)(2)(D)(vi).
    The proposed exclusion in Sec.  205.20(b)(6) also would not apply 
to other payment devices that do not have a specified monetary value 
but are redeemable for a specified product or service, other than 
admission to an event or venue. For example, an issuer or retailer may 
sell a certificate or card that is redeemable for a spa treatment or 
for a hotel stay. In such circumstances, the certificate or card is not 
applied to obtain admission to the spa or hotel itself, but is used to 
pay for services at those locations. The exclusion does not apply to 
such cards because they are not redeemable solely for admission to an 
event or venue. See EFTA Section 915(a)(2)(D)(vi). Nonetheless, other 
exclusions in the rule may apply in these circumstances. See, e.g., 
proposed Sec.  205.20(b)(3).
    Proposed comment 20(b)(6)-1 provides examples to illustrate the 
exclusion in Sec.  205.20(b)(6). In addition to the examples discussed 
above, the proposed comment also provides an example of cards that are 
redeemable solely for membership to a buyer's club or warehouse or to a 
gym. Such cards would fall within the exclusion in Sec.  205.20(b)(6) 
because memberships are necessary for entry or admission to those 
locations. The exclusion would not apply if the card has value that 
could be applied either for a membership or for goods or services at 
the warehouse or gym. See comment 20(b)(6)-1.v.
20(c) Form of Disclosures
20(c)(1) Clear and Conspicuous
    New EFTA Sections 915(b)(3)(A) and (c)(2)(B) (15 U.S.C. 
1693m(b)(3)(A) and (c)(2)(B)), as added by Section 401 of the Credit 
Card Act, require that the disclosures made pursuant to those 
paragraphs be clear and conspicuous. The Board believes it is also 
appropriate to apply the clear and conspicuous standard to the 
disclosures the Board is proposing under Sec.  205.20(f). Thus, 
pursuant to the Board's authority under new EFTA section 904, proposed 
Sec.  205.20(c)(1) applies the clear and conspicuous standard to all 
disclosures required under Sec.  205.20.
    Proposed comment 20(c)(1)-1 clarifies the meaning of the term 
``clear and conspicuous'' for the purposes of this section. 
Specifically, as the proposed comment explains, disclosures are clear 
and conspicuous for the purposes of this section if they are readily 
understandable and, in the case of written and electronic disclosures, 
the location and type size are readily noticeable to consumers. 
Disclosures need not, however, be located on the front of the 
certificate or card to be considered clear and conspicuous. Disclosures 
are clear and conspicuous for the purposes of this section if they are 
in a print that contrasts with and is otherwise not obstructed by the 
background on which they are printed. For example, disclosures on a 
card or computer screen are not likely to be conspicuous if obscured by 
a logo printed in the background. Similarly, the proposed comment 
states that a disclosure on the back of a card that is printed on top 
of indentations from embossed type on the front of the card is not 
likely to be conspicuous if it obstructs the readability of the type. 
The proposed comment clarifies that oral disclosures, to the extent 
they are permitted, meet the clear and conspicuous standard when they 
are given at a volume and speed sufficient for a consumer to hear and 
comprehend them.
    Though the proposal requires that the prescribed disclosures be 
clear and conspicuous, it does not include a specific type size or 
prominence requirement, except where otherwise noted. As discussed 
below in proposed Sec.  205.20(e)(3)(iii), certain disclosures 
regarding funds expiration are required to be made with equal 
prominence and in close proximity to the certificate or card expiration 
date on a certificate or card. The Board included this requirement 
because of its specific concerns related to customer confusion with 
respect to a certificate or card expiration date that may differ from 
the expiration date for the underlying funds. However, the Board 
believes requiring every disclosure on a certificate or card to have an 
equal prominence or a minimum type size standard is impractical, 
because the size of certificates or cards will vary. Therefore, a 
general type size that is appropriate for one card may not fit on a 
smaller card, due to the limited amount of space. Moreover, such 
standards would present issues for disclosures even on standard-sized 
cards, because the amount of space on such cards is limited.
    The Board requests comment on whether description of the clear and 
conspicuous standard in the final rule should include a type size or 
prominence requirement for all disclosures and, if so, what standard is 
appropriate. The Board also requests comment on whether there are 
alternatives to a type size or prominence requirement that could ensure 
that disclosures on a card are clear and conspicuous to a consumer.
    Proposed Sec.  205.20(c)(1) states that the disclosures required by 
this section may contain commonly accepted or readily understandable 
abbreviations or symbols. Proposed comment 20(c)(1)-2 provides 
illustrative examples, stating that the use of abbreviations and 
symbols such as ``mo.'' for month or a ``/'' to indicate ``per'' is 
permissible. The proposed comment notes that it is sufficient under the 
clear and conspicuous standard to state, for example, that a particular 
fee is charged ``$2.50/mo. after 12 mos.''
20(c)(2) Format
    Proposed Sec.  205.20(c)(2) states that disclosures required by 
this section generally must be provided to the consumer in written or 
electronic form. Because the disclosures are not required to be in 
written form, proposed comment 20(c)(2)-1 clarifies that electronic 
disclosures made under this section are not subject to compliance with 
the consumer consent and other applicable provisions of the Electronic 
Signatures in Global and National Commerce Act (E-Sign Act) (15 U.S.C. 
7001 et seq.), which only applies when information is required to be 
provided to a consumer in writing. The comment clarifies that 
electronic disclosures may not be provided through a hyperlink or in 
another manner by which the purchaser can bypass the disclosure. An 
issuer or vendor is not required to confirm that the consumer has read 
the electronic disclosures.
    Proposed comment 20(c)(2)-2 addresses disclosure requirements in 
circumstances where no physical certificate or card is issued. Under 
the proposed comment, disclosures would be required to accompany the 
code, confirmation, or other written or electronic document provided to 
the consumer.
    Proposed Sec.  205.20(c)(2) states that only disclosures provided 
under Sec.  205.20(c)(3) may be provided orally. Allowing oral 
disclosures is necessary because, in some circumstances, disclosures 
cannot be made prior to purchase unless made orally, such as when a 
certificate or card is purchased by telephone. Even where oral 
disclosures are permitted, written or electronic disclosures must still 
be provided on or with the certificate or card. See proposed Sec. Sec.  
205.20(d)(2), (e)(3), and (f).
20(c)(3) Disclosures Prior to Purchase
    New EFTA Section 915(b)(3)(B) (15 U.S.C. 1693m(b)(3)(B)), requires 
that dormancy, inactivity, or service fees be

[[Page 60997]]

disclosed before a gift certificate, or store gift card, or general-use 
prepaid card is purchased. In addition, the Board proposes to use its 
authority under EFTA Section 904 to require the disclosure of 
additional fees under Sec.  205.20(f)(1), discussed below, and the 
terms and conditions of expiration of the funds prior to purchase of 
the certificate or card. See proposed Sec. Sec.  205.20(e)(3) and 
(f)(1), discussed below. These requirements are implemented in proposed 
Sec.  205.20(c)(3).
    The Board believes that consumers contemplating the purchase of a 
certificate or card need information about all fees and the terms and 
conditions of expiration before purchasing a certificate or card. Even 
if the purchaser is not the ultimate user of the certificate or card, 
the Board believes that a purchaser should be aware of any potential 
costs to the recipient and the amount of time the recipient has to use 
the funds underlying the certificate or card. Making this type of 
information available to purchasers may also foster competition.
    Proposed comment 20(c)(3)-1 clarifies that the disclosures required 
under this paragraph must be provided regardless of whether the 
certificate or card is purchased in person, on-line, by telephone, or 
by other means.
20(c)(4) Disclosures on the Certificate or Card
    Proposed Sec.  205.20(c)(4) addresses the requirements in Sec.  
205.20 that certain disclosures be provided on the certificate or card 
itself. See proposed Sec. Sec.  205.20(d)(2), 205.20(e)(3), and 
205.20(f)(2). The paragraph states that a disclosure made in an 
accompanying terms and conditions document, on packaging, or on a 
sticker or other label affixed to the certificate or card does not 
constitute a disclosure on the certificate or card.
    The Board believes this interpretation is consistent with new EFTA 
Section 915(b)(3)(A), which requires that a gift certificate, store 
gift card, or general-use prepaid card clearly and conspicuously state 
any dormancy, inactivity, or service fee and the conditions under which 
they can be imposed. Requiring the fees and conditions to be disclosed 
on the certificate or card ensures that the consumer and, if 
applicable, the gift recipient will always have access to the 
disclosures, because they cannot be separated from the certificate or 
card. Moreover, a number of State laws already require certain fee and 
expiration date disclosures on certificates or cards.\12\ Pursuant to 
its authority under new EFTA Section 915(d)(1)(A), and as discussed 
below in Sec. Sec.  205.20(e)(3) and (f)(2), the Board is proposing to 
extend the requirement that certain disclosures be on the certificate 
or card itself to certain additional disclosures. Specifically, the 
proposal states that the certificate or card itself must state the 
terms and conditions of expiration of the funds; a toll-free telephone 
number a consumer may call for fee information or replacement 
certificates or cards; and, if one is maintained, a Web site a consumer 
may access for fee information or replacement certificates or cards.
---------------------------------------------------------------------------

    \12\ See, e.g., Ark. Code Sec.  4-88-703 and Neb. Rev. Stat. 
Sec. Sec.  69-1305.03(e) and (f) (requiring expiration date and 
certain fees to be disclosed on the gift certificate or card), and 
Or. Rev. Stat. Sec.  646A.278 (requiring expiration date to be 
disclosed on the gift card).
---------------------------------------------------------------------------

    The Board recognizes that the proposed requirements regarding 
disclosures that must appear on a covered certificate or card may 
present implementation challenges with respect to certain products, 
particularly those that are small and have little space on which to 
print required disclosures. The Board seeks comment regarding any 
approaches or solutions that could avoid potential impediments to 
innovation while still providing consumers clear and conspicuous 
disclosures. The Board also seeks comment regarding how issuers 
currently provide disclosures and how issuers comply with State laws 
which have similar disclosure requirements to those set forth in the 
proposed rules.
20(d) Prohibition on Imposition of Fees or Charges
    New EFTA Sections 915(b)(1) and (2) generally prohibit the 
imposition of a dormancy, inactivity, or service fee with respect to a 
gift certificate, store gift card or general-use prepaid card unless: 
(a) There has been no activity for the 12-month period ending on the 
day the charge is imposed; (b) certain disclosure requirements have 
been met; (c) only one such fee is charged in any given month; and (d) 
the certificate or card complies with any additional requirements the 
Board may establish. See 15 U.S.C. 1693m(b)(1) and (2). Regarding the 
disclosure requirements noted above, new EFTA Section 915(b)(3) 
provides that before a dormancy, inactivity, or service fee may be 
imposed, a certificate or card must clearly and conspicuously disclose: 
(a) That a dormancy, inactivity, or service fee may be charged; (b) the 
amount of the fee; (c) how often such fee or charge may be assessed; 
and (d) that such fee or charge may be assessed for inactivity. See 15 
U.S.C. 1693m(b)(3). Moreover, the issuer or vendor of such certificate 
or card must inform the purchaser of such charge or fee before such 
certificate or card is purchased, regardless of whether the certificate 
or card is purchased in person, over the Internet, or by telephone. See 
15 U.S.C. 1693m(b)(3)(B).
    Proposed Sec.  205.20(d) generally implements new EFTA Sections 
915(b)(1), (2), and (3) while proposed Sec.  205.20(c)(3), discussed 
above, implements new EFTA Section 915(b)(3)(B).\13\ The Board notes 
that although ``dormancy or inactivity fee'' is defined separately from 
``service fee,'' for improved readability, proposed Sec.  205.20(d) and 
associated commentary refer to these fees collectively as ``dormancy, 
inactivity, or service fees.'' As discussed above, proposed Sec.  
205.20(c)(3) also requires the issuer or vendor to inform the purchaser 
about certain other terms prior to purchase.
---------------------------------------------------------------------------

    \13\ The proposed rule does not separately implement the 
exclusion in new EFTA Section 915(b)(4) from the dormancy, 
inactivity, or service fee restrictions for gift certificates 
distributed pursuant to an award, loyalty, or promotional program 
and with respect to which there is no money or other value 
exchanged. The Board believes this exclusion is already effectively 
implemented through the definition of ``gift certificate'' in 
proposed Sec.  205.20(a)(1)(iii) and the exclusion in proposed Sec.  
205.20(b)(3) for loyalty, award, or promotional gift cards.
---------------------------------------------------------------------------

    The Board is proposing several comments to clarify the provisions 
in Sec.  205.20(d). Proposed comment 20(d)-1 illustrates with examples 
how to determine when a dormancy, inactivity, or service fee may be 
imposed. Proposed comment 20(d)-2 clarifies the meaning of ``activity'' 
for purposes of proposed Sec.  205.20(d)(1). Specifically, any action 
by the consumer to increase, decrease or otherwise make use of the 
funds underlying a certificate or card constitutes activity. For 
example, the purchase and activation of a card or the reloading of 
funds onto a card constitutes activity for purposes of Sec.  
205.20(d)(1). However, activity with respect to a certificate or card 
would not include the imposition of a fee, the replacement of an 
expired, lost, or stolen certificate or card, or a balance inquiry. The 
Board solicits comment on whether there are any other actions taken by 
a consumer that should be considered ``activity'' for purposes of 
proposed Sec.  205.20(d)(1).
    Proposed Sec.  205.20(d)(2) and (c)(3) require similar, but not 
identical, disclosures. Proposed comment 20(d)-3 clarifies the 
interaction between these provisions. Specifically, the proposed

[[Page 60998]]

comment provides that depending on the context, a single disclosure 
regarding dormancy, inactivity, or service fees imposed that meets the 
clear and conspicuous requirement may satisfy both the requirement in 
Sec.  205.20(d)(2) that the disclosures be provided on the certificate 
or card and the requirement in Sec.  205.20(c)(3) that the disclosures 
be provided prior to purchase. For example, if the disclosures on a 
certificate or card, required by Sec.  205.20(d)(2), are visible to the 
consumer without having to remove packaging or other materials sold 
with the certificate or card for a purchase made in person, the 
disclosures also meet the requirements of Sec.  205.20(c)(3). If, 
however, the disclosure does not meet the requirements of both 
Sec. Sec.  205.20(d)(2) and (c)(3), proposed comment 20(d)-3 states 
that a dormancy, inactivity, or service fee may need to be disclosed 
multiple times or in multiple locations to satisfy the requirements of 
Sec. Sec.  205.20(d)(2) and (c)(3). For example, if the disclosures on 
a certificate or card, required by Sec.  205.20(d)(2), are obstructed 
by packaging or other materials sold with the certificate or card for a 
purchase made in person, they also must be disclosed on the packaging 
sold with the certificate or card or in other manner visible to the 
consumer to meet the requirements of Sec.  205.20(c)(3).
    Proposed Sec. Sec.  205.20(d)(2), (e)(3), and (f)(2) require 
certain disclosures to be made on the certificate or card itself, as 
applicable. Proposed comment 20(d)-4 clarifies that in addition to 
disclosures required under Sec.  205.20(d)(2), any applicable 
disclosures under Sec. Sec.  205.20(e)(3) and (f)(2) of this section 
must also be provided on the certificate or card.
    Finally, proposed comment 20(d)-5 clarifies the prohibition in 
Sec.  205.20(d)(3) against charging more than one dormancy, inactivity, 
or service fee in any given calendar month. Specifically, proposed 
comment 20(d)-5 provides that if a dormancy, inactivity, or service fee 
is already imposed in a given calendar month, a second dormancy, 
inactivity, or service fee may not be imposed that month. If more than 
one dormancy, inactivity, or service fee is possible on a given day, 
the person assessing the fee may choose which dormancy, inactivity, or 
service fee to impose. The proposed comment also clarifies that the 
restriction in proposed Sec.  205.20(d)(3) applies only to dormancy, 
inactivity, or service fees. As a result, a fee that is not a dormancy, 
inactivity, or service fee may be imposed in addition to a dormancy, 
inactivity, or service fee in a given month. Proposed comment 20(d)-5 
would also provide examples with specific dates to illustrate these 
concepts.
20(e) Prohibition on Sale of Gift Certificates or Cards With Expiration 
Dates
    New EFTA Section 915(c) prohibits the sale of a gift certificate, 
store gift card, or general-use prepaid card subject to an expiration 
date unless: (a) The expiration date is not earlier than five years 
after the date on which a gift certificate was issued, or the date on 
which card funds were last loaded to a store gift card or general-use 
prepaid card; and (b) the terms of expiration are clearly and 
conspicuously stated. See 15 U.S.C. 1693m(c). Proposed Sec.  205.20(e) 
implements new EFTA Section 915(c).
Application of EFTA Section 915(c) to Certificate or Card Expiration 
and Funds Expiration
    New EFTA Section 915(c) does not specify whether the restrictions 
apply to the expiration of the certificate or card itself or the 
underlying funds. It is the Board's understanding that for many 
general-use prepaid cards, and perhaps some gift certificates and store 
gift cards, the expiration date for the certificate or card differs 
from the expiration date for the underlying funds. For example, the 
underlying funds of some network-branded cards, which are required to 
have card expiration dates under card network rules and systems, never 
expire.
    In order to ensure that consumers receive the full protection 
established by the statute with respect to the value of the certificate 
or card, proposed Sec.  205.20(e)(2) would require that funds be 
available for the later of: (a) Five years from the date the gift 
certificate was issued, or the date on which funds were last loaded to 
a store gift card or general-use prepaid card; or (b) until the 
certificate or card expiration date.
    In addition, to prevent consumer confusion, the proposed rule 
addresses the potential mismatch and resulting disconnect between a 
stated expiration or valid through date of the certificate or card and 
the date the funds expire. Specifically, consumers may assume that once 
the certificate or card expiration date has passed, the underlying 
funds are no longer valid or available. Presumably, a certificate or 
card expiration date that matches the funds expiration date would not 
cause confusion among consumers. However, a certificate or card 
expiration date that is identical to the funds expiration date may not 
be feasible. First, at the time a certificate or card expiration date 
is printed on a certificate or card, it may be impossible to predict 
the funds expiration date, which would, under the Board's proposed 
rule, depend on when a consumer purchases the certificate or card or 
adds funds to a reloadable card. For example, if the certificate or 
card expiration date is printed during the certificate or card 
manufacturing process, this process may occur several months prior to 
the date the consumer purchases the certificate or card and activates 
it for use. Second, because the expiration date required under new EFTA 
Section 915(c) for store gift cards and general-use prepaid cards must 
be calculated from the date the funds were last loaded, this would 
mean, in practice, that funds underlying a reloadable card might never 
expire.
    The Board considered prohibiting the use of expiration or valid 
through dates for gift certificates, store gift cards, and general-use 
prepaid cards. However, the Board understands that certain network 
systems may not be able to support products that do not carry 
expiration or valid through dates because of fraud and security 
concerns. In addition, card expiration dates may be necessary for other 
business reasons, such as to ensure that a card can remain usable for 
its lifespan. Moreover, merchants have become accustomed to looking 
for, or, in the case of telephone or on-line purchases, requesting, 
certificate or card expiration dates. Mandating certificates or cards 
without expiration or valid through dates could create significant 
confusion among merchants, which in turn, could result in problems for 
consumers' use of gift certificates, store gift cards, and general-use 
prepaid cards at such merchants. Therefore, to harmonize, to the extent 
feasible, the certificate or card expiration date and the funds 
expiration date, the Board is proposing two alternative approaches for 
applying new EFTA Section 915(c) to the expiration of a certificate or 
card in Sec.  205.20(e)(1).
    Under Alternative A of proposed Sec.  205.20(e)(1), the Board is 
proposing that a person may not sell a gift certificate, store gift 
card, or general-use prepaid card subject to an expiration date unless 
the certificate or card expiration date is at least five years after 
the date the certificate or card is sold or issued to a consumer. The 
Board understands that there are some issuers and retailers of prepaid 
cards with systems and procedures currently in place to prevent the 
sale or issuance of a certificate or card unless there is a minimum 
amount of time left before the certificate or card expiration date; for 
example, 12 to 18 months from the date of sale or issuance. These 
issuers and retailers may currently employ

[[Page 60999]]

inventory controls or point-of-sale procedures to prevent sales of 
certificates or cards that do not meet the minimum time. For these 
issuers and retailers, compliance with Alternative A would likely only 
involve altering their systems and procedures to accommodate the five-
year time period instead of the current minimum time frame. However, 
the Board is concerned that it may not be operationally feasible for 
all issuers and retailers of gift certificates, store gift cards, and 
general-use prepaid cards to institute these types of systems and 
procedures by the mandatory compliance date of the final rule.
    Alternative B of proposed Sec.  205.20(e)(1) would instead require 
entities involved in issuing, distributing, and selling certificates or 
cards to adopt policies and procedures to ensure that a consumer will 
have a reasonable opportunity to purchase a certificate or card with at 
least five years remaining until the certificate or card expiration 
date. Proposed comment 20(e)-1 under Alternative B would set forth 
positive and negative examples of providing consumers a reasonable 
opportunity to purchase a certificate or card with at least five years 
remaining until the certificate or card expiration date. For example, a 
person subject to this rule would comply with Alternative B of proposed 
Sec.  205.20(e)(1) if a card is printed with an expiration date that is 
six years from the date the card was produced and on a display rack at 
a retail store within six months of the date the card was produced. 
Similarly, a person would comply with Alternative B of proposed Sec.  
205.20(e)(1) if a card is printed with an expiration date that is seven 
years from the date the card was produced and on a display rack at a 
retail store within one year and six months of the date the card was 
produced. However, a person would not comply with Alternative B of 
proposed Sec.  205.20(e)(1) if a card is printed with a card expiration 
date six years from the date it was produced and is stored in a 
distribution warehouse for more than one year before being made 
available for sale.
    Unlike Alternative A of Sec.  205.20(e)(1), Alternative B would not 
require a person to confirm that a certificate or card is in fact sold 
or issued to a consumer with at least five years before the certificate 
or card expiration date. As a result, the expiration date reflected on 
the certificate or card may, in some cases, be less than five years 
from the date of sale or issuance. While the consumer would still have 
use of the underlying funds for a minimum of five years from the date 
of sale or issuance, as would be required under proposed Sec.  
205.20(e)(2), the Board is concerned that a certificate or card 
reflecting a certificate or card expiration date earlier than the funds 
expiration date could prompt consumers to dispose of the certificate or 
card before the funds expiration date.
    The Board believes that Alternative A would provide the greatest 
precision in matching the certificate or card expiration date with the 
funds expiration date, though Alternative B may be easier to implement 
than Alternative A. Given that persons subject to the rule may be able 
to comply with Alternative B more rapidly than Alternative A, the Board 
also solicits comment on whether it should consider adopting 
Alternative B for a transitional period and adopt Alternative A as of a 
subsequent date in order to provide more time to implement Alternative 
A.
    While either Alternative A or Alternative B may adequately address 
potential consumer confusion regarding expiration dates with respect to 
non-reloadable cards, such protections may not be sufficient for 
reloadable cards where the funds expiration date changes each time the 
card is reloaded. The Board is proposing to address this issue by 
requiring certain disclosures related to the expiration of the 
underlying funds. As discussed more fully below in the supplementary 
information to proposed Sec.  205.20(e)(3), the Board is proposing that 
the terms and conditions of expiration of the underlying funds be 
disclosed on the certificate or card, including, where applicable, a 
statement that the certificate or card expires, but the underlying 
funds either do not expire or expire later than the certificate or 
card, and that the consumer may contact the issuer for a replacement 
card. See proposed Sec.  205.20(e)(3)(iii).
    The Board also solicits comment on whether an additional or 
alternative substantive solution to the proposed notice in Sec.  
205.20(e)(3) may be warranted. Specifically, the Board is requesting 
comment on whether it should also or alternatively require issuers to 
automatically issue a replacement card to consumers prior to the card 
expiration date of a reloadable card if the underlying funds will not 
expire until after the card expiration date. The Board understands that 
for some reloadable cards, issuers currently collect certain 
information from the consumer, including name and address, before the 
consumer may be permitted to reload funds to the card, or in some 
cases, use the card at all. Thus, these issuers would have the 
information necessary to send replacement cards before the card 
expiration date, much as issuers currently do for credit cards, which 
would avoid consumer confusion as to whether the underlying funds may 
still be available. The Board is concerned, however, that not all 
issuers of reloadable cards may have the systems in place to collect 
name and address information and that establishing such systems could 
be prohibitively expensive for these issuers. Furthermore, if a 
consumer does not notify the gift card issuer of changes in address, 
the issuer may not have a reliable current address to which it could 
send a replacement card. The Board seeks comment on operational 
considerations and the feasibility of implementing this requirement for 
reloadable cards.
Disclosures Related to Certificate or Card Expiration and Funds 
Expiration
    New EFTA Section 915(c)(2)(B), which the Board proposes to 
implement in Sec.  205.20(e)(3), requires that the terms and conditions 
of expiration be clearly and conspicuously stated. See 15 U.S.C. 
1693m(c)(2)(B).
    Under proposed Sec.  205.20(e)(3), three disclosures must be stated 
on the certificate or card, as applicable. First, proposed Sec.  
205.20(e)(3)(i) provides that the disclosures must state the expiration 
date for the underlying funds or, if the underlying funds do not 
expire, that fact. In some instances, the exact expiration date of the 
underlying funds may not be able to be determined. For example, in the 
case of reloadable cards, the funds expiration date is determined under 
the statute and the Board's proposed rule by the date the consumer last 
loaded funds onto the card. As a result, the funds expiration date 
adjusts each time the consumer reloads the card. For example, if a 
consumer purchases a reloadable card on January 15, 2010, the funds may 
expire on or after January 15, 2015. However, if a consumer loads more 
funds onto the card on July 15, 2012, the funds may not expire until on 
or after July 15, 2017. To accommodate this circumstance, proposed 
comment 20(e)-1 under Alternative A (comment 20(e)-2 under Alternative 
B) clarifies that Sec.  205.20(e) does not require disclosure of the 
precise date the funds will expire. It would be sufficient to disclose, 
for example, ``Funds expire 5 years from the date funds last loaded to 
the card.''; ``Funds can be used 5 years from the date money was last 
added to the card.''; or ``Funds do not expire.'' The Board requests 
comment on whether these sample disclosures would effectively 
communicate how long a consumer has

[[Page 61000]]

access to funds underlying a certificate or card.
    Proposed comment 20(e)-2 under Alternative A (comment 20(e)-3 under 
Alternative B) clarifies that if the certificate or card and the 
underlying funds do not expire, that fact need not be disclosed. The 
Board believes that disclosing the fact that the underlying funds do 
not expire is not necessary in these situations because there is no 
risk of consumers confusing the expiration date of the certificate or 
card with that of the underlying funds.
    Second, proposed Sec.  205.20(e)(3)(ii) provides that the 
disclosures must also include a toll-free telephone number and, if one 
is maintained, a Web site that a consumer may use to obtain a 
replacement certificate or card after the certificate or card expires, 
if the underlying funds may be available. Requiring a toll-free 
telephone number to be maintained for purposes of obtaining a 
replacement card is appropriate because, as discussed above, a 
certificate or card expiration date may be earlier than the funds 
expiration date.\14\ While the proposed rule does not similarly require 
that a Web site be maintained for such purposes, if one is maintained, 
that Web site must also be disclosed under Sec.  205.20(e)(3)(ii). By 
requiring contact information to be on the certificate or card itself, 
the Board believes that consumers will more easily be able to obtain a 
replacement certificate or card should the certificate or card expire 
before the underlying funds.
---------------------------------------------------------------------------

    \14\ As discussed below under proposed Sec.  205.20(f), the 
requirement that the telephone number be toll-free recognizes that 
the end user of a certificate or card may not reside in the area 
where the certificate or card was initially purchased.
---------------------------------------------------------------------------

    Proposed comment 20(e)-3 under Alternative A (comment 20(e)-4 under 
Alternative B) clarifies that if a certificate or card does not expire, 
or if the underlying funds are not available after the certificate or 
card expires, the disclosure required by proposed Sec.  
205.20(e)(3)(ii) need not be stated on the certificate or card. A toll-
free telephone number and a Web site may still be required to be 
disclosed, however, pursuant to proposed Sec.  205.20(f)(2) if the 
certificate or card has fees. Proposed comment 20(e)-4 under 
Alternative A (comment 20(e)-5 under Alternative B) clarifies that the 
same toll-free telephone number and Web site may be used to comply with 
the requirements of Sec. Sec.  205.20(e)(3)(ii) and (f)(2).\15\ In 
addition, the proposed comment provides that neither a toll-free number 
nor a Web site must be maintained or disclosed on a certificate or card 
if no fees are imposed in connection with the certificate or card, and 
the certificate or card and underlying funds do not expire.
---------------------------------------------------------------------------

    \15\ The contact information may also be the same contact 
information provided for any or all customer service issues or 
questions relating to the certificate or card.
---------------------------------------------------------------------------

    Finally, proposed Sec.  205.20(e)(3)(iii) would require, if 
applicable, a statement that the certificate or card expires, but the 
underlying funds either do not expire or expire later than the 
certificate or card, and that the consumer may contact the issuer for a 
replacement card. This requirement is designed to ensure that consumers 
are alerted to any distinction between the certificate or card 
expiration date and the funds expiration date so that they do not 
mistakenly believe the funds are no longer available during the minimum 
five-year period set forth in the statute.
    Proposed Sec.  205.20(e)(3)(iii) also requires the statement to be 
disclosed with equal prominence and in close proximity to the 
certificate or card expiration date. While other required disclosures 
in this section are not subject to similar prominence and proximity 
requirements, the Board believes that such requirements are appropriate 
for the disclosures required under proposed Sec.  205.20(e)(3)(iii). 
Typically, the expiration date for a certificate or card may be printed 
on the certificate or card in a prominent location and type size, which 
enables the merchant to easily verify the validity of the card at 
point-of-sale and the consumer to find this date when making telephone 
or on-line purchases. Thus, the Board is concerned that the prominence 
of the expiration date on the certificate or card (without any 
additional protections) may lead consumers to assume that once the 
certificate or card itself expires, the underlying funds will be 
unavailable. The disclosures proposed under Sec.  205.20(e)(3)(iii) 
regarding expiration are intended not only to inform consumers of their 
rights, but also to reduce potential consumer confusion that may occur 
if an expiration date for a certificate or card differs from the funds 
expiration date. Therefore, the Board believes disclosures regarding 
the expiration of the funds require more specific format requirements 
than other disclosures that are required to be on the certificate or 
card.
    As clarified in proposed comment 20(e)-5 under Alternative A 
(comment 20(e)-6 under Alternative B), close proximity, in the context 
of a certificate or card, means that the disclosure must appear on the 
same side as the certificate or card expiration date so that consumers 
do not automatically assume funds are not available after the 
certificate or card expiration date. For example, many card expiration 
dates are stated on the front of a card. If the disclosure alerting the 
consumer to the fact that this expiration date does not apply to the 
underlying funds is printed on the back of the certificate or card, the 
consumer may not notice the disclosure if he or she does not have 
reason to look for an additional disclosure. However, if the disclosure 
is on the front of the card in close proximity to the card expiration 
date, the consumer may be more likely to notice it and seek additional 
information regarding how the consumer could continue to use the card 
after the card expiration date.
    Proposed comment 20(e)-5 under Alternative A (comment 20(e)-6 under 
Alternative B) also clarifies that if the disclosure is the same type 
size and is located immediately next to or directly above or below the 
certificate or card expiration date, without any intervening text or 
graphical displays, the disclosures would be deemed to be equally 
prominent and in close proximity. The disclosure need not be embossed 
on the certificate or card to be deemed equally prominent, even if the 
expiration date is embossed on the certificate or card. The Board 
believes these format standards would sufficiently ensure that most 
consumers can determine whether an expiration date for a certificate or 
card is different from the funds expiration date.
    Proposed comment 20(e)-5 under Alternative A (comment 20(e)-6 under 
Alternative B) provides examples regarding how a disclosure may inform 
a consumer of the distinction between the certificate or card 
expiration and the funds expiration. The disclosure may state on the 
front of the card, for example, ``Valid thru 09/2016. Call for new 
card.''; ``Active thru 09/2016. Call for replacement card.''; or ``Call 
for new card after 09/2016.'' The Board believes these disclosures, 
used in conjunction with other disclosures required to be on the card, 
such as a toll-free number that a consumer could call for a replacement 
card, would provide sufficient information to inform consumers that 
they may be able to continue using their funds after the certificate or 
card itself has expired.
    The Board recognizes that the amount of space available for 
disclosures near the certificate or card expiration date is limited. 
The Board requests comment regarding the feasibility of disclosing the 
sample disclosures or similar statements ``in close proximity'' to the 
certificate or card expiration date. The Board also requests comment on 
whether the ``equal prominence''

[[Page 61001]]

standard is appropriate in the context of certificates or cards, or if 
the Board should prescribe a minimum type-size requirement and, if so, 
what type size is appropriate. Finally, the Board requests comment on 
other effective methods of notifying consumers that underlying funds 
may continue to be available after a certificate or card itself 
expires.
    Finally, the Board notes that proposed Sec. Sec.  205.20(d)(2), 
(e)(3), and (f)(2) (as discussed below) require certain disclosures to 
be made on the certificate or card itself, as applicable. Proposed 
comment 20(e)-6 under Alternative A (comment 20(e)-7 under Alternative 
B) thus clarifies that in addition to any disclosures required under 
Sec.  205.20(e)(3), any applicable disclosures under Sec. Sec.  
205.20(d)(2) and (f)(2) of this section must also be provided on the 
certificate or card.
Other Protections and Clarifications
    To ensure that consumers have full use of the funds loaded on a 
certificate or card for the minimum five-year period set forth in the 
statute, the Board proposes to use its authority under EFTA Section 
904(c) to restrict the imposition of fees to replace an expired 
certificate or card if the funds loaded on the certificate or card have 
not expired. See 15 U.S.C. 1693b(c). Proposed Sec.  205.20(e)(4) under 
both alternatives thus ensures that consumers retain a cost-free means 
to access funds if a certificate or card expires before the funds have 
expired. Proposed Sec.  205.20(e)(4) contains an exception, however, 
for certificates or cards that have been lost or stolen. As a result, a 
fee to replace a certificate or card before the expiration date of the 
funds may be imposed for a lost or stolen certificate or card, to the 
extent otherwise permitted under law. Proposed comment 20(e)-7 under 
Alternative A (comment 20(e)-8 under Alternative B) clarifies that 
although a fee is permitted to be charged to replace a lost or stolen 
certificate or card under proposed Sec.  205.20(e)(4), the rule does 
not create a substantive requirement that issuers replace a lost or 
stolen certificate or card.
    Proposed comment 20(e)-8 under Alternative A (comment 20(e)-9 under 
Alternative B), clarifies that a certificate or card is not considered 
to be issued or loaded with funds until it has been activated for use. 
The Board understands that gift card issuers often produce gift cards 
for display on retail shelves and racks or for mailing to consumers. 
However, for security reasons, these cards cannot be used until the 
card has been activated by a retail employee or by telephone. The 
proposed comment clarifies that although a certificate or card may have 
been produced, it is not considered to be ``issued'' or to have had 
funds ``loaded'' for purposes of Sec.  205.20(e) until that card has 
been activated for use.
20(f) Additional Disclosure Requirements for Gift Certificates or Cards
    EFTA Section 905(a)(4) (15 U.S.C. 1693c(a)(4)) and Sec.  
205.7(b)(5) of Regulation E require the disclosure of any fees imposed 
by a financial institution for electronic fund transfers or for the 
right to make such transfers. Pursuant to its authority under new EFTA 
Section 915(d)(2) (15 U.S.C. 1693m(d)(2)) to determine the extent to 
which the individual provisions of the EFTA and Regulation E should 
apply to gift certificates, store gift cards, and general-use prepaid 
cards, the Board is proposing Sec.  205.20(f) to require additional 
fee-related disclosures for such certificates and cards.
20(f)(1) Fee Disclosures
    The Board believes it is important for consumers to be aware of the 
fees that may be imposed before they use a certificate or card. As a 
result, proposed Sec.  205.20(f)(1) would require that, for each type 
of fee that may be imposed in connection with a gift certificate, store 
gift card, or general-use prepaid card, certain information concerning 
fees must be disclosed on or with the certificate or card. 
Specifically, the type of fee, the amount of the fee (or an explanation 
of how the fee will be determined), and the conditions under which the 
fee may be imposed must be disclosed. The provision excludes dormancy, 
inactivity, and service fees, which must be disclosed under proposed 
Sec.  205.20(d)(2). Therefore, fees other than dormancy, inactivity, or 
service fees, such as one-time initial issuance fees and cash-out fees, 
must be disclosed under proposed Sec.  205.20(f)(1). Furthermore, in 
light of the other disclosures that must be provided on the certificate 
or card itself and because the size of a certificate or card may limit 
the disclosures that may be clearly and conspicuously disclosed on the 
certificate or card, the proposal permits this additional information 
to be disclosed either on or with the certificate or card. In addition, 
similar to the disclosure requirements for dormancy, inactivity, and 
service fees, the Board proposes to require the disclosure of these 
fees prior to purchase, as discussed above in the supplementary 
information to Sec.  205.20(c)(3).
20(f)(2) Telephone Number for Fee Information
    The Board also proposes to use its authority under new EFTA 
Sections 915(c)(2)(B) and 915(d)(1)(A), and EFTA Section 904 to require 
that a toll-free telephone number and, if one is maintained, a Web 
site, for information on fees be disclosed clearly and conspicuously on 
a gift certificate, store gift card, or general-use prepaid card. See 
15 U.S.C. 1693m(c)(2)(B); 15 U.S.C. 1693m(d)(1)(A); 15 U.S.C. 1693b. 
Under proposed Sec.  205.20(f)(2), a toll-free telephone number must be 
maintained to provide information on fees required to be disclosed 
under proposed Sec. Sec.  205.20(d)(2) and (f)(1). The proposed rule 
does not similarly require that a Web site be maintained for such 
purposes, but if one is maintained, that Web site must also be 
disclosed under Sec.  205.20(f)(2).
    As discussed above, given the limited space on a certificate or 
card, the Board anticipates that issuers may opt to disclose some fee 
information on materials accompanying the certificate or card, as 
opposed to on the certificate or card itself. If such information 
accompanies the certificate or card, the disclosure may become 
separated from the actual certificate or card. By requiring the 
reference to the toll-free telephone number and, if one is maintained, 
the Web site on the certificate or card, the proposal seeks to ensure 
that consumers have an easy and cost-free means of obtaining fee 
information related to the certificate or card, even if the consumer no 
longer has the original disclosure.
    Furthermore, the Board believes requiring the telephone number to 
be toll-free is appropriate. Because gift certificates, store gift 
cards, and general-use prepaid cards may be given by the purchaser to 
another person, the end user of the certificate or card may not reside 
in the area where the certificate or card was initially purchased. In 
addition, the majority of certificates or cards sold in the United 
States are issued by large retailers or large banks whose customer 
service centers are not necessarily located in the area where the 
certificate or card was purchased or will be used. A toll-free 
telephone number would provide consumers with a means to access fee and 
replacement certificate or card information without cost no matter 
where in the United States the user of the certificate or card may 
utilize the certificate or card.
    Moreover, the Board understands that many issuers already maintain 
toll-free telephone numbers and Web sites for consumers to contact for 
further

[[Page 61002]]

information. Issuers maintaining toll-free telephone numbers or Web 
sites often provide this information directly on the certificates or 
cards they issue. As a result, the Board believes the proposed rule 
would not impose additional burden on many issuers.
    The proposal contains several comments to clarify proposed Sec.  
205.20(f). Proposed comment 20(f)-1 clarifies that if a certificate or 
card does not have any fees, the disclosure required by Sec.  
205.20(f)(2) need not be disclosed on the certificate or card. A 
telephone number and a Web site may still be required to be disclosed 
pursuant to Sec.  205.20(e)(3)(ii) if funds underlying a certificate or 
card may be available after the certificate or card expires.
    Proposed comment 20(f)-2 clarifies that the same toll-free number 
and Web site may be used to fulfill the requirements of Sec. Sec.  
205.20(e)(3)(ii) and (f)(2).\16\ Neither a toll-free number nor a Web 
site must be maintained or disclosed if no fees are imposed in 
connection with a certificate or card, and the certificate or card and 
underlying funds do not expire.
---------------------------------------------------------------------------

    \16\ The contact information may also be the same contact 
information provided for any or all customer service issues or 
questions relating to the certificate or card.
---------------------------------------------------------------------------

    Proposed Sec. Sec.  205.20(d)(2), (e)(3), and (f)(2) require 
certain disclosures to be made on the certificate or card itself, as 
applicable. Proposed comment 20(f)-3 thus clarifies that in addition to 
any disclosures required to be made pursuant to Sec.  205.20(f)(2), any 
applicable disclosures under Sec. Sec.  205.20(d)(2) and (e)(3) of this 
section must be disclosed on the certificate or card.
Additional Issues
Authority To Adopt Additional EFTA Protections
    New EFTA Section 915(d)(2) directs the Board to determine the 
extent to which the individual definitions and provisions of the EFTA 
or Regulation E should apply to general-use prepaid cards, gift 
certificates, and store gift cards. See 15 U.S.C. 1693m(d)(2). As 
discussed in proposed Sec.  205.20(f), the Board is proposing to 
exercise this authority to mandate for each type of fee that may be 
imposed (such as a transaction fee, a balance inquiry fee, or an 
issuance fee), disclosure of the type of fee, the amount of the fee, 
and the conditions under which such fee may be imposed. These 
disclosures must be provided on or with a gift certificate, store gift 
card, or general-use prepaid card subject to the rule. This requirement 
is consistent with the requirement in EFTA Section 905(a)(4) (15 U.S.C. 
1693c(a)(4)) and Regulation E Sec.  205.7(b)(5) to disclose any charges 
for EFTs or for the right to make transfers.
    The Board is not proposing at this time to apply to gift 
certificates, store gift cards, or general-use prepaid cards, any other 
requirements that generally apply to accounts under the EFTA and 
Regulation E, such as periodic statement disclosures or error 
resolution obligations. See, e.g., EFTA Sections 906(c) and 908; 15 
U.S.C. 1693d(c) and 1693f. The Board believes that it is more 
appropriate to make any such determination in the context of a broader 
rulemaking that covers prepaid cards generally to avoid any regulatory 
gaps or inconsistencies. For example, a requirement to impose some form 
of periodic statement or error resolution obligations for reloadable 
gift cards could lead to inconsistent treatment if similar requirements 
were not simultaneously adopted for general-purpose reloadable cards, 
which in many cases are marketed as substitutes for accounts subject to 
the EFTA and Regulation E.
    At this time, the Board is also not proposing to exercise the 
authority under new EFTA Section 915(d)(1) to limit the amount of 
dormancy, inactivity, or service fees, or the balance below which such 
fees or charges may be assessed. See 15 U.S.C. 1693m(d)(1). The Board 
understands that dormancy and inactivity fees in connection with retail 
gift cards have trended downward over time. For example, the most 
recent survey by one government agency indicates the median inactivity 
fee has decreased from $1.73 per month to $1.38 per month from 2003 to 
2007.\17\ Given this trend, there does not appear to be a need for the 
Board to adopt additional restrictions at this time. Moreover, the 
statute only permits one such fee per month if there has been no 
activity over the preceding 12-month period. The Board will continue to 
monitor the development of the gift card market and could take action 
to address dormancy, inactivity, or service fees at a later time, if 
appropriate.
---------------------------------------------------------------------------

    \17\ See Montgomery County Office of Consumer Protection, Gift 
Card Reports, 2003-2007 (available at: http://www.montgomerycountymd.gov/ocptmpl.asp?url=/content/ocp/consumer/a-zgiftcardreports.asp). One major issuer of a network-branded gift 
cards has recently announced plans to eliminate monthly fees 
altogether. See Andrew Martin, ``American Express to End Monthly 
Fees on Gift Cards,'' New York Times, October 1, 2009, at B2. In 
addition, the Retail Gift Card Association which is comprised of 
nine of the top retail merchant issuers of retail closed-loop gift 
cards includes in its Code of Principles, the elimination of 
dormancy or inactivity fees and of expiration dates. See Retail Gift 
Card Association, Code of Principles (available at: http://www.thergca.org/uploads/Code_of_Principles_PDF.pdf) .
---------------------------------------------------------------------------

Transition Issues
    As discussed above, the Credit Card Act requires the Board to adopt 
final rules implementing new EFTA Section 915 within nine months of the 
date of enactment, or no later than February 22, 2010. These final 
rules must become effective no later than August 22, 2010.
    In light of the pending effective date of the final rule, the Board 
seeks comment on the potential costs that would be incurred if issuers 
and other program participants were required to remove and replace card 
stock, including cards that have already been placed into store 
inventory, to ensure that all products sold on or after August 22, 2010 
fully comply with the new requirements.
    The Board also solicits comment on whether it should consider rules 
to grandfather gift certificates, store gift cards, or general-use 
prepaid cards, as those terms are defined, that are in the marketplace 
as of the effective date of the rule from some or all of the 
requirements set forth in this rulemaking. For example, the Board could 
require all such certificates or cards to comply with the substantive 
restrictions on imposing dormancy, inactivity, or service fees, and 
expiration dates, but otherwise permit such certificates or cards to be 
sold even if they do not contain the required disclosures. To the 
extent such relief would be provided, however, the Board believes it 
would be appropriate to do so only for cards that are sold in physical 
retail channels, but not to cards that are purchased on-line or by 
telephone, as they may not present the same operational challenges in 
replacing existing card stock compared to the former. In addition, if 
the Board were to permit certificates or cards that are available on 
retail shelves or in distribution warehouses to be sold to consumers 
after the effective date, comment is requested regarding how issuers or 
vendors could alert consumers to the changed terms regarding dormancy, 
inactivity, or service fees and funds expiration dates. The Board also 
solicits comment on an appropriate transition period after which all 
certificates or cards must fully comply with the new rules.

V. Initial Regulatory Flexibility Analysis

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) 
generally requires an agency to perform an

[[Page 61003]]

assessment of the impact a rule is expected to have on small entities.
    However, under section 605(b) of the RFA, the regulatory 
flexibility analysis otherwise required under section 604 of the RFA is 
not required if an agency certifies, along with a statement providing 
the factual basis for such certification, that the rule will not have a 
significant economic impact on a substantial number of small entities. 
Based on its analysis and for the reasons stated below, the Board 
believes that this proposed rule is not likely to have a significant 
economic impact on a substantial number of small entities. A final 
regulatory flexibility analysis will be conducted after consideration 
of comments received during the public comment period.
    1. Statement of the need for, and objectives of, the proposed rule. 
The EFTA was enacted to provide a basic framework establishing the 
rights, liabilities, and responsibilities of participants in electronic 
fund transfer systems. The primary objective of the EFTA is the 
provision of individual consumer rights. 15 U.S.C. 1693. The EFTA 
authorizes the Board to prescribe regulations to carry out the purpose 
and provisions of the statute. 15 U.S.C. 1693b(a). The Act expressly 
states that the Board's regulations may contain ``such classifications, 
differentiations, or other provisions, * * * as, in the judgment of the 
Board, are necessary or proper to effectuate the purposes of [the Act], 
to prevent circumvention or evasion [of the Act], or to facilitate 
compliance [with the Act].'' 15 U.S.C. 1693b(c).
    The Board is proposing revisions to Regulation E to implement Title 
IV of the Credit Card Act which would generally prohibit any person 
from imposing a dormancy, inactivity, or service fee with respect to a 
gift certificate, store gift card, or general-use prepaid card. Title 
IV also generally provides that a gift certificate, store gift card, or 
general-use prepaid card may not be sold or issued unless the 
expiration date is no less than five years from the date a gift 
certificate is issued or five years from the date funds were last 
loaded to a store gift card or general-use prepaid card.
    In addition, the proposed rule would require the disclosure of all 
other fees imposed in connection with a gift certificate, store gift 
card, or general-use prepaid card. The certificate or card must also 
state a toll-free telephone number and, if one is maintained, a Web 
site that a consumer may contact to obtain fee information or 
replacement certificates or cards.
    The Board believes that the revisions to Regulation E discussed 
above are consistent with the Act, as amended by Title IV of the Credit 
Card Act, and within Congress's broad grant of authority to the Board 
to adopt provisions that carry out the purposes of the statute.
    2. Small entities affected by the proposed rule. The number of 
small entities affected by this proposal is unknown. Under the proposed 
rule, a person would be prohibited from imposing a dormancy, 
inactivity, or service fee with respect to a gift certificate, store 
gift card, or general-use prepaid card, unless three conditions are 
satisfied. First, a dormancy, inactivity, or service fee 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 
issuer or vendor must provide these disclosures to the purchaser before 
the certificate or card is purchased.
    The proposed rule would also provide 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 given prior to purchase.
    Two proposed alternative approaches are set forth to minimize 
potential confusion for consumers if the certificate or card expires 
before the underlying funds expire. The first alternative would 
prohibit the sale or issuance of a certificate or card that has a 
printed expiration date that is less than five years from the date of 
purchase. The second alternative would require entities subject to the 
rule to maintain policies or procedures to ensure that a consumer has a 
reasonable opportunity to purchase a certificate or card with an 
expiration date that is at least five years from the date of purchase. 
The proposed rule would also prohibit the imposition of any fees for 
replacing an expired certificate or card to ensure that consumers are 
able to access the underlying funds for the full five-year period.
    In addition to the statutory fee restrictions described above, the 
proposed rule would require the disclosure of all other fees imposed in 
connection with a gift certificate, store gift card, or general-use 
prepaid card. These disclosures would have to be provided on or with 
the certificate or card and given prior to purchase. The proposed rule 
would also require the disclosure on the certificate or card of a toll-
free telephone number and, if one is maintained, a Web site that a 
consumer may contact to obtain fee information or replacement 
certificates or cards.
    Overall, to comply with the proposed rule, all persons involved in 
issuing, distributing or selling a gift card program may need to review 
and potentially revise disclosures that appear on or with a certificate 
or card. In addition, under either alternative approach to the rule 
addressing potential inconsistencies between card expiration dates and 
funds expiration dates, issuers, sellers, and distributors of gift 
certificates, store gift cards, and general-use prepaid cards will have 
to review and potentially revise their inventory distribution and 
management policies and controls to minimize the possibility that a 
consumer may purchase a card with an expiration date of less than five 
years from the date of purchase.
    For gift certificates and store gift cards in particular, the 
proposed rule would potentially cover all merchants to the extent that 
they issue or sell gift certificates or store gift cards. According to 
the U.S. Census Bureau, there were over 3 million businesses that are 
involved in retail or food services as of September 2009.\18\ These 
businesses are potential issuers of gift certificates or store gift 
cards.\19\
---------------------------------------------------------------------------

    \18\ See U.S. Census Bureau, Press Release, ``Advance Monthly 
Sales for Retail and Food Services--September 2009,'' (available at: 
http://www.census.gov/retail/marts/www/marts_current.pdf).
    \19\ The Board is unaware of any industry data regarding the 
number of merchants that issue gift certificates, store gift cards, 
or general-use prepaid cards. Nonetheless, the Board believes the 
actual number of merchants that issue such certificates or cards is 
likely to be far fewer than the number of businesses that are 
involved in retail or food services overall.
---------------------------------------------------------------------------

    The Small Business Administration (SBA) has defined a small 
business as one whose average annual receipts do not exceed $7 million 
or who have fewer than 500 employees.\20\ Of the over 3 million retail 
or food services businesses, the Board expects that well

[[Page 61004]]

over 90% of these businesses qualify as small businesses under the 
SBA's standards.\21\ Consequently, a very large number of small 
entities across all retail trade or food categories could be subject to 
the proposed rules.
---------------------------------------------------------------------------

    \20\ See SBA, Summary of Size Standards by Industry (available 
at: http://www.sba.gov/contractingopportunities/officials/size/summaryofssi/index.html).
    \21\ See Small Business Administration, Office of the Advocacy, 
Frequently Asked Questions (available at: http://web.sba.gov/faqs/faqindex.cfm?areaID=24); Employer Firms, & Employment by Employment 
Size of Firm by NAICS Codes, 2006 (available at: http://www.sba.gov/advo/research/us06_n6.pdf).
---------------------------------------------------------------------------

    Nonetheless, the proposed requirements would only apply to the 
extent that a certificate or card program imposes dormancy, inactivity, 
or service fees or establishes an expiration date with respect to the 
underlying funds. In this regard, the Board understands that the vast 
majority of gift certificates and store gift cards issued by merchants 
or retailers today do not carry such fees or expiration dates.\22\ 
Moreover, smaller merchants are more likely to issue gift certificates 
in paper form only. Such certificates are excluded from coverage by the 
statute and proposed rule. See proposed Sec.  205.20(b)(5). Thus, the 
Board believes the proposed rule would not impact a significant number 
of merchants that issue store gift cards or gift certificates. 
Similarly, the Board believes the proposed rule also would not 
significantly impact the entities that distribute or sell such cards or 
certificates on behalf of merchants. Moreover, the Board understands 
that given their size, such entities are unlikely to be ``small 
businesses'' as defined by the SBA.
---------------------------------------------------------------------------

    \22\ See Montgomery County Office of Consumer Protection, Gift 
Cards 2007 (available at: http://www.montgomerycountymd.gov/ocptmpl.asp?url=/content/ocp/consumer/a-zgiftcardreports.asp) 
(reporting that 18 of 22 retail gift cards surveyed do not carry any 
fees or expiration dates). See also Retail Gift Card Association, 
Code of Principles (available at: http://www.thergca.org/uploads/Code_of_Principles_PDF.pdf) (recommending as a best practice for 
retail gift card programs that no fees or expiration dates should 
apply).
---------------------------------------------------------------------------

    In addition, the proposed rule would potentially cover issuers of 
general-use prepaid cards, primarily financial institutions, card 
program managers that issue or distribute general-use prepaid cards, 
and distributors or retailers of such cards. General-use prepaid cards 
may be more likely to carry dormancy, inactivity, or service fees and 
expiration dates compared to gift certificates and store gift cards. 
Consequently, entities that issue, distribute or sell general-use 
prepaid cards would be more likely to be impacted by the proposed rule.
    As an initial matter, the Board notes that cards that would 
otherwise be considered general-use prepaid cards may in many cases be 
exempt from the statute and proposed rule because they are reloadable 
and not marketed or labeled as a gift card or gift certificate. 
Moreover, as noted above, open-loop cards, which include general-use 
prepaid cards, make up a relatively small portion of the total prepaid 
card market in terms of number of cards issued and the dollar value of 
the amounts loaded. Thus, although the Board is not aware of any data 
regarding entities that issue or otherwise sell general-use prepaid 
cards, the Board does not believe that, overall, the rule is likely to 
have a significant impact on a substantial number of small entities 
with respect to the issuance or sale of general-use prepaid cards.
    3. Other Federal rules. The Board has not identified any Federal 
rules that duplicate, overlap, or conflict with the proposed revisions 
to Regulation E.
    4. Significant alternatives to the proposed revisions. The Board 
solicits comment on any significant alternatives that would reduce 
regulatory burden associated with this proposed rule on small entities.

VI. Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act (PRA) of 1995 (44 
U.S.C. 3506; 5 CFR 1320 Appendix A.1), the Board reviewed the rule 
under the authority delegated to the Board by the Office of Management 
and Budget (OMB). The collection of information that is subject to the 
PRA by this proposed rule is found in 12 CFR part 205. The Federal 
Reserve may not conduct or sponsor, and an organization is not required 
to respond to, this information collection unless the information 
collection displays a currently valid OMB control number. The OMB 
control number is 7100-0200.
    This information collection is required to provide benefits for 
consumers and is mandatory. See 15 U.S.C. 1693 et seq. Since the Board 
does not collect any information, no issue of confidentiality arises. 
The respondents/recordkeepers are for-profit financial institutions, 
including small businesses. Institutions are required to retain records 
for 24 months, but this regulation does not specify types of records 
that must be retained.
    Title IV of the Credit Card Act prohibits any person from imposing 
a dormancy, inactivity, or service fee with respect to 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 or charge. Second, 
only one such fee may be assessed in a given month. Third, disclosures 
regarding dormancy, inactivity, or service fees must be clearly and 
conspicuously stated on the certificate or card, and the issuer or 
vendor must provide these disclosures before the certificate or card is 
purchased.
    The Credit Card Act also provides that a gift certificate, store 
gift card, or general-use prepaid card may not be sold or issued unless 
the expiration date 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, the statute requires that the 
terms of expiration must be clearly and conspicuously stated on the 
certificate or card.
    Any entities involved in the issuance, distribution, or sale of 
gift certificates, store gift cards, or general-use prepaid cards (or 
the issuance or distribution of loyalty, award, or promotional gift 
cards) potentially are affected by this collection of information 
because these entities will be required to provide disclosures 
regarding the fees imposed in connection with these certificates or 
cards and when the funds underlying a certificate or card expire. Under 
the proposed rule, gift certificates, store gift cards, and general-use 
prepaid cards must state certain disclosures about dormancy, 
inactivity, or service fees; expiration dates; and a telephone number 
and Web site, if one is maintained, for additional information. 
Disclosures about other fees must be provided on or with the 
certificate or card. In addition, disclosures about fees and expiration 
dates must be provided to the consumer prior to purchase. Loyalty, 
award, and promotional gift cards also must state disclosures regarding 
applicable fees and expiration dates.
    Entities subject to the rule will have to review and revise 
disclosures that are currently provided on or with a certificate or 
card to ensure that they accurately state any fees and expiration dates 
that may apply.
    The total estimated burden increase, as well as the estimates of 
the burden increase associated with each major section of the proposed 
rule as set forth below, represents averages for all respondents 
regulated by the Federal Reserve. The Federal Reserve expects that the 
amount of time required to implement each of the proposed changes for a 
given institution may vary based on the size and complexity of the 
respondent. Furthermore, the burden estimate for this rulemaking 
includes the burden addressing overdrafts to Regulation E, as announced 
in a

[[Page 61005]]

separate final rulemaking (Docket No. R-1343).
    Proposed Sec.  205.20(b)(2) implements the exclusion for cards, 
codes, or other devices that are reloadable and not marketed or labeled 
as a gift card or gift certificate. As noted in proposed comment 
205.20(b)(2)-4.i., institutions would qualify for this exclusion so 
long as policies and procedures reasonably designed to avoid the 
marketing of a prepaid card not otherwise subject to the rule, such as 
a general-purpose reloadable card, as a gift card or gift certificate 
are established and maintained. The Federal Reserve estimates that the 
1,205 respondents regulated by the Federal Reserve would take, on 
average, 40 hours (one-business week) to implement written policies and 
procedures and provide training associated with proposed Sec.  
205.20(b)(2). The Federal Reserve estimates the annual one-time burden 
for respondents to be 48,200 hours and believes that, on a continuing 
basis, respondents would take an average of 8 hours annually to 
maintain their policies and procedures.
    The Federal Reserve is proposing two alternative approaches for 
applying new EFTA Section 915(c) to the expiration of a certificate or 
card in Sec.  205.20(e)(1). Alternative A proposes that institutions 
may not sell a gift certificate, store gift card, or general-use 
prepaid card subject to an expiration date unless the certificate or 
card expiration date is at least five years after the date the 
certificate or card is sold or issued to a consumer. Alternative B 
would require institutions involved in issuing, distributing, and 
selling certificates or cards to adopt policies and procedures to 
ensure that a consumer will have a reasonable opportunity to purchase a 
certificate or card with at least five years remaining until the 
certificate or card expiration date. With either alternative the 
Federal Reserve estimates that the 1,205 respondents regulated by the 
Federal Reserve would take, on average, 40 hours (one-business week) to 
implement or modify written policies and procedures and provide 
training associated with proposed Sec.  205.20(e)(1). The Federal 
Reserve estimates the annual one-time burden for respondents to be 
48,200 hours and believes that, on a continuing basis, respondents 
would take an average of 8 hours annually to maintain their policies 
and procedures.
    Under proposed Sec.  205.20(e)(3), three disclosures must be stated 
on the certificate or card, as applicable: (1) Disclosures must state 
the terms of expiration of the underlying funds or, if the underlying 
funds do not expire, that fact; (2) Disclosures must also include a 
toll-free telephone number and, if one is maintained, a Web site that a 
consumer may use to obtain a replacement certificate or card after the 
certificate or card expires, if the underlying funds may be available; 
(3) The terms and conditions of funds expiration required to be 
disclosed must also include a statement that the certificate or card 
expires, but the underlying funds either do not expire or expire later 
than the certificate or card, and that the consumer may contact the 
issuer for a replacement card. The Federal Reserve estimates that the 
1,205 respondents regulated by the Federal Reserve would take, on 
average, 80 hours (two-business weeks) to update their systems to 
revise disclosures and redesign certificates or cards to comply with 
the proposed disclosure requirements in section 205.20(e)(3). The 
Federal Reserve estimates the annual one-time burden for respondents to 
be 96,400 hours and believes that, on a continuing basis, there would 
be no additional increase in burden.
    The Federal Reserve estimates the proposed rule would impose a one-
time increase in the annual burden under Regulation E for all 
respondents regulated by the Federal Reserve by 192,800 hours, from 
526,520 to 719,320 hours. In addition, the Federal Reserve estimates 
that, on a continuing basis, the proposed requirements would increase 
the annual burden by 19,280 hours from 526,520 to 545,800 hours. The 
total annual burden would increase by 212,080 hours, from 526,520 to 
738,600 hours.
    The other Federal financial agencies are responsible for estimating 
and reporting to OMB the total paperwork burden for the institutions 
for which they have administrative enforcement authority. They may, but 
are not required to, use the Federal Reserve's burden estimation 
methodology. Using the Federal Reserve's method, the current total 
estimated annual burden for all persons subject to Regulation E, 
including Federal Reserve-supervised institutions would be 
approximately 1,403,459 hours. The above estimates represent an average 
across all respondents and reflect variations between persons based on 
their size, complexity, and practices. All covered persons, including 
depository institutions (of which there are approximately 17,200), 
potentially are affected by this collection of information, and thus 
are respondents for purposes of the PRA. The proposed rule would impose 
a one-time increase in the estimated annual burden for such 
institutions by 2,752,000 hours. On a continuing basis the proposed 
rule would increase in the estimated annual burden for such 
institutions by 275,200 hours. The proposal total annual burden for the 
respondents regulated by the Federal financial agencies is estimated to 
be 4,430,659 hours.
    Comments are invited on: (a) Whether the proposed collection of 
information is necessary for the proper performance of the Federal 
Reserve's functions; including whether the information has practical 
utility; (b) the accuracy of the Federal Reserve's estimate of the 
burden of the proposed information collection, including the cost of 
compliance; (c) ways to enhance the quality, utility, and clarity of 
the information to be collected; and (d) ways to minimize the burden of 
information collection on respondents, including through the use of 
automated collection techniques or other forms of information 
technology. Comments on the collection of information should be sent to 
Michelle Shore, Federal Reserve Board Clearance Officer, Division of 
Research and Statistics, Mail Stop 95-A, Board of Governors of the 
Federal Reserve System, Washington, DC 20551, with copies of such 
comments sent to the Office of Management and Budget, Paperwork 
Reduction Project (7100-0200), Washington, DC 20503.

Text of Proposed Revisions

    Certain conventions have been used to highlight the proposed 
changes to the text of the regulation and staff commentary. New 
language is shown inside bold-faced arrows, while language that would 
be deleted is set off with bold-faced brackets.

List of Subjects in 12 CFR Part 205

    Consumer protection, Electronic fund transfers, Federal Reserve 
System, Reporting and recordkeeping requirements.

    For the reasons set forth in the preamble, the Board proposes to 
amend 12 CFR part 205 and the Official Staff Commentary, as follows:

PART 205--ELECTRONIC FUND TRANSFERS (REGULATION E)

    1. The authority citation for part 205 continues to read as 
follows:

    Authority: 15 U.S.C. 1693b.

    2. Section 205.4(a)(1) is revised to read as follows:


Sec.  205.4  General disclosure requirements; jointly offered services.

    (a)(1) Form of disclosures. Disclosures required under this part 
shall be clear and readily understandable, in writing, and in a form 
the consumer may keep[rtrif], except as otherwise provided in this 
part[ltrif]. The disclosures required by

[[Page 61006]]

this part may be provided to the consumer in electronic form, subject 
to compliance with the consumer-consent and other applicable provisions 
of the Electronic Signatures in Global and National Commerce Act (E-
Sign Act) (15 U.S.C. 7001 et seq.). A financial institution may use 
commonly accepted or readily understandable abbreviations in complying 
with the disclosure requirements of this part.
* * * * *
    3. Section 205.12(b)(1) is revised to read as follows:


Sec.  205.12  Relation to other laws.

* * * * *
    (b) * * *
    (1) Inconsistent requirements. The Board shall determine, upon its 
own motion or upon the request of a State, financial institution, or 
other interested party, whether the act and this part preempt State law 
relating to electronic fund transfers[rtrif], or to dormancy, 
inactivity, or service fees, or expiration dates, of gift certificates, 
store gift cards, or general-use prepaid cards[ltrif].
* * * * *
    4. Section 205.20 is added as follows:


Sec.  205.20  Requirements for gift cards and gift certificates.

    (a) Definitions. For purposes of this section, except as excluded 
under paragraph (b), the following definitions apply:
    (1) Gift certificate means a card, code, or other device that is:
    (i) Issued to a consumer in a specified amount that may not be 
increased or reloaded in exchange for payment; and
    (ii) Redeemable upon presentation at a single merchant or an 
affiliated group of merchants for goods or services.
    (2) Store gift card means a card, code, or other device that is:
    (i) Issued to a consumer in a specified amount, whether or not that 
amount may be increased or reloaded by the cardholder, in exchange for 
payment; and
    (ii) Redeemable upon presentation at a single merchant or an 
affiliated group of merchants for goods or services.
    (3) General-use prepaid card means a card, code, or other device 
that is:
    (i) Issued to a consumer in a specified amount, whether or not that 
amount may be increased or reloaded by the cardholder, in exchange for 
payment; and
    (ii) Redeemable upon presentation at multiple, unaffiliated 
merchants for goods or services, or usable at automated teller 
machines.
    (4) Loyalty, award, or promotional gift card means a card, code, or 
other device that:
    (i) Is issued in connection with a loyalty, award, or promotional 
program;
    (ii) Is redeemable upon presentation at one or more merchants for 
goods or services, or usable at automated teller machines; and
    (iii) Sets forth the disclosures specified in paragraphs (d)(2), 
(e)(2), and (f)(2) of this section and provides the disclosures 
specified in paragraph (f)(1) of this section on or with the card, 
code, or other device.
    (5) Dormancy or inactivity fee. The terms ``dormancy fee'' and 
``inactivity fee'' mean a fee for non-use of or inactivity on a gift 
certificate, store gift card, or general-use prepaid card.
    (6) Service fee. The term ``service fee'' means a periodic fee for 
holding or use of a gift certificate, store gift card, or general-use 
prepaid card.
    (b) Exclusions. The terms ``gift certificate,'' ``store gift 
card,'' and ``general-use prepaid card'', as defined in paragraph (a) 
of this section, do not include any card, code, or other device that 
is:
    (1) Useable solely for telephone services;
    (2) Reloadable and not marketed or labeled as a gift card or gift 
certificate;
    (3) A loyalty, award, or promotional gift card;
    (4) Not marketed to the general public;
    (5) Issued in paper form only; or
    (6) Redeemable solely for admission to events or venues at a 
particular location or group of affiliated locations, or to obtain 
goods or services, in conjunction with admission to such events or 
venues, at the event or venue or at specific locations affiliated with 
and in geographic proximity to the event or venue.
    (c) Form of disclosures. (1) Clear and conspicuous. Disclosures 
made under this section must be clear and conspicuous. The disclosures 
may contain commonly accepted or readily understandable abbreviations 
or symbols.
    (2) Format. Disclosures made under this section generally must be 
provided to the consumer in written or electronic form. Only 
disclosures provided under paragraph (c)(3) of this section may be 
given orally.
    (3) Disclosures prior to purchase. Before a gift certificate, store 
gift card, or general-use prepaid card is purchased, the issuer or 
vendor of such certificate or card must disclose to the consumer the 
information required by paragraphs (d)(2), (e)(3), and (f)(1) of this 
section.
    (4) Disclosures on the certificate or card. Paragraphs (d)(2), 
(e)(3), and (f)(2) of this section require that certain information be 
disclosed on the certificate or card. A disclosure made in an 
accompanying terms and conditions document, on packaging surrounding a 
certificate or card, or on a sticker or other label affixed to the 
certificate or card does not constitute a disclosure on the certificate 
or card.
    (d) Prohibition on imposition of fees or charges.
    No person may impose a dormancy, inactivity, or service fee with 
respect to a gift certificate, store gift card, or general-use prepaid 
card, unless:
    (1) There has been no activity with respect to the certificate or 
card in the one-year period ending on the date on which the fee is 
imposed;
    (2) The following are stated, as applicable, clearly and 
conspicuously on the gift certificate, store gift card, or general-use 
prepaid card:
    (i) The amount of any dormancy, inactivity, or service fee that may 
be charged;
    (ii) How often such fee may be assessed; and
    (iii) That such fee may be assessed for inactivity; and
    (3) Not more than one dormancy, inactivity, or service fee is 
imposed in any given calendar month.

Alternative A--Paragraph (e)

    (e) Prohibition on sale of gift certificates or cards with 
expiration dates. No person may sell or issue a gift certificate, store 
gift card, or general-use prepaid card with an expiration date, unless:
    (1) The certificate or card expiration date, if any, is at least 
five years after the date the certificate or card was sold or issued to 
a consumer;
    (2) The expiration date for the underlying funds is at least the 
later of:
    (i) Five years after the date the gift certificate was issued, or 
five years after the date on which funds were last loaded to a store 
gift card or general-use prepaid card; or
    (ii) The certificate or card expiration date, if any;
    (3) The following disclosures are provided on the certificate or 
card, as applicable:
    (i) The expiration date for the underlying funds or, if the 
underlying funds do not expire, that fact;
    (ii) A toll-free telephone number and, if one is maintained, a Web 
site that a consumer may use to obtain a replacement certificate or 
card after the certificate or card expires if the underlying funds may 
be available; and
    (iii) A statement, disclosed with equal prominence and in close 
proximity to the certificate or card expiration date, that the 
certificate or card expires, but

[[Page 61007]]

the underlying funds either do not expire or expire later than the 
certificate or card, and that the consumer may contact the issuer for a 
replacement card; and
    (4) No fee or charge is imposed on the cardholder for replacing the 
gift certificate, store gift card, or general-use prepaid card prior to 
the funds expiration date, unless such certificate or card has been 
lost or stolen.

Alternative B--Paragraph (e)

    (e) Prohibition on sale of gift certificates or cards with 
expiration dates. No person may sell or issue a gift certificate, store 
gift card, or general-use prepaid card with an expiration date, unless:
    (1) The person has policies and procedures in place to ensure that 
a consumer will have a reasonable opportunity to purchase a certificate 
or card with at least five years remaining until the certificate or 
card expiration date;
    (2) The expiration date for the underlying funds is at least the 
later of:
    (i) Five years after the date the gift certificate was issued, or 
the date on which funds were last loaded to a store gift card or 
general-use prepaid card; or
    (ii) The certificate or card expiration date, if any;
    (3) The following disclosures are provided on the certificate or 
card, as applicable:
    (i) The expiration date for the underlying funds or, if the 
underlying funds do not expire, that fact;
    (ii) A toll-free telephone number and, if one is maintained, a Web 
site that a consumer may use to obtain a replacement certificate or 
card after the certificate or card expires if the underlying funds may 
be available; and
    (iii) A statement, disclosed with equal prominence and in close 
proximity to the certificate or card expiration date, that the 
certificate or card expires, but the underlying funds either do not 
expire or expire later than the certificate or card, and that the 
consumer may contact the issuer for a replacement card; and
    (4) No fee or charge is imposed on the cardholder for replacing the 
gift certificate, store gift card, or general-use prepaid card prior to 
the funds expiration date, unless such certificate or card has been 
lost or stolen.
    (f) Additional disclosure requirements for gift certificates or 
cards. Additional disclosures must be provided in connection with a 
gift certificate, store gift card, or general-use prepaid card, as 
applicable, as indicated below:
    (1) Fee disclosures. For each type of fee that may be imposed in 
connection with the certificate or card (other than a dormancy, 
inactivity, or service fee subject to the disclosure requirements under 
paragraph (d)(2) of this section), the following information must be 
provided on or with the certificate or card:
    (i) The type of fee;
    (ii) The amount of the fee (or an explanation of how the fee will 
be determined); and
    (iii) The conditions under which the fee may be imposed.
    (2) Telephone number for fee information. A toll-free telephone 
number and, if one is maintained, a Web site that a consumer may use to 
obtain information about fees described in paragraphs (d)(2) and (f)(1) 
of this section must be disclosed on the certificate or card.
    5. In Supplement I to part 205.
    a. Under Sec.  205.12 Relation to other laws, under (b) Preemption 
of inconsistent State laws, paragraph 1. is revised.
    b. Section 205.20--Requirements for Gift Cards and Gift 
Certificates is added.

Supplement I to Part 205--Official Staff Interpretations

* * * * *

Section 205.12--Relation to Other Laws

* * * * *
(b) Preemption of Inconsistent State Laws
    1. Specific determinations. The regulation prescribes standards for 
determining whether State laws that govern EFTs[rtrif], dormancy, 
inactivity, or service fees, or expiration dates of gift certificates, 
store gift cards, or general-use prepaid cards[ltrif] are preempted by 
the act and the regulation. A State law that is inconsistent may be 
preempted even if the Board has not issued a determination. However, 
nothing in section 205.12(b) provides a financial institution with 
immunity for violations of State law if the institution chooses not to 
make State disclosures and the Board later determines that the State 
law is not preempted.
* * * * *

Section 205.20--Requirements for Gift Cards and Gift Certificates

20(a) Definitions
    1. Form of card, code, or device. Section 205.20 applies to any 
card, code, or other device that meets one of the definitions in Sec.  
205.20(a)(1) through (a)(3) of this section, even if it is not issued 
in card form. Section 205.20 would apply, for example, to the issuance 
of an account number or bar code that can access underlying funds. 
Similarly, Sec.  205.20 would apply to a device with a chip or other 
embedded mechanism, linking the device to stored funds, such as a 
mobile phone or sticker containing a contactless chip, if the device 
otherwise meets the definition of gift certificate, store gift card or 
general-use prepaid card.
    2. Electronic promise. The term ``electronic promise'' as used in 
EFTA Sections 915(a)(2)(B), (a)(2)(C), and (a)(2)(D) means a person's 
commitment or obligation communicated or stored in electronic form made 
to a consumer to provide payment for goods or services for transactions 
initiated by the consumer. The electronic promise is itself represented 
by a card, code or other device that is issued or honored by the 
person, reflecting the person's commitment or obligation to pay. For 
example, if a merchant issues a code that can be given as a gift and 
that entitles the recipient to redeem the code in an on-line 
transaction for goods or services, that code represents an electronic 
promise by the merchant and would be a card, code, or other device 
covered by Sec.  205.20.
Paragraph 20(a)(2)--Store Gift Card
    1. Relationship between ``gift certificate'' and ``store gift 
card''. The term ``store gift card'' in Sec.  205.20(a)(2) includes 
``gift certificates'' as defined in Sec.  205.20(a)(1). For example, a 
numeric or alphanumeric code representing a specified dollar amount or 
value that is electronically sent to a consumer as a gift which can be 
redeemed or exchanged by the recipient to obtain goods or services may 
be both a ``gift certificate'' and a ``store gift card'' if the 
specified amount or value cannot be increased.
    2. Affiliated group of merchants. The term ``affiliated group of 
merchants'' means two or more affiliated merchants or other persons 
that are related by common ownership or common corporate control (see, 
e.g., 12 CFR 227.3(b) and 12 CFR 223.2) and that share the same name, 
mark, or logo. For example, the term would include franchisees that are 
subject to a common set of corporate policies or practices under the 
terms of their franchise licenses. The term also applies to two or more 
merchants or other persons that agree among each other, by contract or 
otherwise, to redeem cards, codes, or other devices bearing the same 
name, mark, or logo (other than the mark, logo, or brand of a payment 
network), for the purchase of goods or services solely at such 
merchants or persons. For example, assume a movie theatre chain and a 
restaurant chain jointly agree to

[[Page 61008]]

issue cards that share the same ``Flix and Food'' logo that can be 
redeemed solely towards the purchase of movie tickets or concessions at 
any of the participating movie theatres, or towards the purchase of 
food or beverages at any of the participating restaurants. For purposes 
of Sec.  205.20, the movie theatres and the restaurants would be 
considered to be an affiliated group of merchants, and the cards would 
be considered to be ``store gift cards.''
    3. Mall gift cards. See comment 20(a)(3)-2.
Paragraph 20(a)(3)--General-Use Prepaid Card
    1. Redeemable upon presentation at multiple, unaffiliated 
merchants. A card, code, or other device is redeemable upon 
presentation at multiple, unaffiliated merchants if, for example, such 
merchants agree to honor the card, code, or device if it bears the 
mark, logo, or brand of a payment network, pursuant to the rules of the 
payment network.
    2. Mall gift cards. Mall gift cards which are generally intended to 
be used or redeemed for goods or services at participating retailers 
within a shopping mall may be considered store gift cards or general-
use prepaid cards depending on the locations in which the cards may be 
redeemed. For example, if a mall card may only be redeemed at merchants 
within the mall itself, the card is more likely be considered a store 
gift card. However, certain mall cards also carry the brand of a 
payment network and can be used at any retailer that accepts that card 
brand, including retailers located outside of the mall. Such cards 
would be considered general-use prepaid cards.
Paragraph 20(a)(4)--Loyalty, Award, or Promotional Gift Card
    1. Examples of loyalty, award, or promotional programs. Section 
205.20(a)(4) defines a loyalty, award, or promotional gift card as a 
card, code, or other device that is issued in connection with a 
loyalty, award or promotional program. Such cards, codes, or other 
devices are excluded from the definitions of ``gift certificate,'' 
``store gift card,'' and ``general-use prepaid card'' under Sec.  
205.20(b)(3), provided that the disclosures specified in paragraphs 
(d)(2), (e)(2), and (f) of this section are given to the consumer, on 
or with the card, as specified in Sec.  205.20(a)(4)(iii). Examples of 
loyalty, award or promotional programs include:
    i. Loyalty or consumer retention programs operated or administered 
by a merchant that provide to consumers cards redeemable for goods or 
services or other monetary value as a reward for certain purchases at 
or visits to the participating merchant;
    ii. Rebate programs operated or administered by a merchant or 
product manufacturer that provide cards redeemable for goods or 
services or other monetary value to consumers in connection with the 
consumer's purchase of a product or service and the consumer's 
completion of the rebate submission process.
    iii. Sweepstakes or contests that distribute cards redeemable for 
goods or services or other monetary value to consumers as an invitation 
to enter into the promotion for a chance to win a prize.
    iv. Referral programs that may provide cards redeemable for goods 
or services or other monetary value to consumers in exchange for 
referring other potential consumers to a merchant.
    v. Incentive programs through which an employer may provide cards 
redeemable for goods or services or other monetary value to employees, 
for example, to recognize job performance, such as increased sales.
Paragraph 20(a)(6)--Service Fee
    1. Service fees. Under Sec.  205.20(a)(6), a service fee includes a 
periodic fee for holding or use of a gift certificate, store gift card, 
or general-use prepaid card. A periodic fee includes any fee that may 
be imposed on a gift certificate, store gift card, or general-use 
prepaid card from time to time for holding or using the certificate or 
card, such as a monthly maintenance fee, a transaction fee, a reload 
fee, or a balance inquiry fee, whether or not the fee is waived for a 
certain period of time or is only imposed after a certain period of 
time. A service fee does not include a one-time fee, such as an initial 
issuance fee or a cash-out fee.
20(b) Exclusions
    1. Application of exclusion. A card, code, or other device is 
excluded from the definition of ``gift certificate,'' ``store gift 
card,'' or ``general-use prepaid card'' if it meets any of the 
exclusions in Sec.  205.20(b). An excluded card, code, or other device 
generally is not subject to any of the requirements of this section. 
(See, however, Sec.  205.20(a)(4)(iii), requiring certain disclosures 
for loyalty, award, or promotional gift cards).
    2. Eligibility for multiple exclusions. A card, code, or other 
device may fall within more than one exclusion. If a card, code, or 
other device falls within any exclusion, it generally is not covered by 
Sec.  205.20, even if another exclusion may not apply. Thus, for 
example, a corporation may award its employees with a gift card of a 
type that can also be purchased directly from the merchant. While the 
card may not qualify for the exclusion for cards, codes, or other 
devices not marketed to the general public under Sec.  205.20(b)(4) 
because the card can also be obtained through retail channels, it may 
nevertheless be exempt from the substantive requirements of Sec.  
205.20 because it is a loyalty, award, or promotional gift card. (See, 
however, Sec.  205.20(a)(4)(iii), requiring certain disclosures for 
loyalty, award, or promotional gift cards.).
Paragraph 20(b)(1)--Usable Solely for Telephone Services
    1. Examples of excluded products. The exclusion for products usable 
solely for telephone services applies to prepaid cards for long-
distance telephone service, prepaid cards for wireless telephone 
service and prepaid cards for other services analogous in function to a 
telephone, such as prepaid cards for voice over Internet protocol 
(VoIP) access time.
Paragraph 20(b)(2)--Reloadable and Not Marketed or Labeled as a Gift 
Card or Gift Certificate
    1. Reloadable. A card, code, or other device is ``reloadable'' if 
it has the capability of having more funds added by a cardholder after 
the initial purchase or issuance.
    2. Marketed or labeled as a gift card or gift certificate. The term 
``marketed or labeled as a gift card or gift certificate'' means 
directly or indirectly offering, advertising or otherwise suggesting 
the potential use of a card, code or other device, as a gift for 
another person. Whether the exclusion applies generally does not depend 
on the type of entity that makes the promotional message. For example, 
a card may be marketed or labeled as a gift card or gift certificate if 
anyone (other than the purchaser of the card), including the issuer, 
the retailer, the program manager that may distribute the card, or the 
payment network on which a card is used, promotes the use of the card 
as a gift card or gift certificate. A card or certificate, including a 
general-purpose reloadable card, is marketed or labeled as a gift card 
or gift certificate even if it is only occasionally marketed as a gift 
card or gift certificate. For example, a reloadable network-branded 
card would be marketed or labeled as a gift card or gift certificate if 
the issuer principally advertises the card as a less costly alternative 
to a bank account but promotes the card in a television, radio, 
newspaper, or Internet advertisement, or

[[Page 61009]]

on signage as ``the perfect gift'' during the holiday season.
    3. Examples of marketed or labeled as a gift card or gift 
certificate. Examples of marketed or labeled as a gift card or gift 
certificate include:
    i. Displaying the word ``gift'' or ``present'' on a card, 
certificate, or accompanying material, including documentation, 
packaging and promotional displays;
    ii. Representing or suggesting that a certificate or card can be 
given to another person, for example, as a ``token of appreciation'' or 
a ``stocking stuffer,'' or displaying a congratulatory message on the 
card, certificate or accompanying material;
    iii. Incorporating gift-giving or celebratory imagery or motifs, 
such as a bow, ribbon, wrapped present, candle, or congratulatory 
message, on a card, certificate, accompanying documentation, or 
promotional material.
    The term does not include:
    i. Representing that a card or certificate can be used as a 
substitute for a checking, savings, or deposit account;
    ii. Representing that a card or certificate can be used to pay for 
a consumer's health-related expenses--for example, a card tied to a 
health savings account;
    iii. Representing that a card or certificate can be used as a 
substitute for travelers' checks or cash by the purchaser;
    iv. Representing that a card or certificate can be used as a 
budgetary tool or to cover emergency expenses.
    4. Reasonable procedures regarding marketing. The exclusion for a 
card, code, or other device is reloadable and is not marketed or 
labeled as a gift card or gift certificate in Sec.  205.20(b)(2) 
applies if an individual card, code, or other device is not marketed or 
labeled as a gift card or gift certificate and if entities subject to 
the rule maintain policies and procedures reasonably designed to avoid 
such marketing. The following examples illustrate the application of 
Sec.  205.20(b)(2):
    i. An issuer or program manager of prepaid cards agrees to sell 
general-purpose reloadable cards through a retailer. The contract 
between the issuer or program manager and the retailer establishes the 
terms and conditions under which the cards may be sold and marketed at 
the retailer. The terms and conditions include restrictions prohibiting 
the general-purpose reloadable cards from being marketed as a gift card 
or gift certificate, and requirements for policies and procedures to 
regularly monitor or otherwise verify that the cards are not being 
marketed as such. The issuer or program manager sets up one promotional 
display at the retailer for gift cards and another physically separated 
display for excluded products under Sec.  205.20(b), including general-
purpose reloadable cards and wireless telephone cards, such that a 
reasonable consumer would not believe that the excluded cards are gift 
cards. The exclusion in Sec.  205.20(b)(2) applies even if a retail 
clerk inadvertently stocks or places some of the general-purpose 
reloadable cards on the gift card display notwithstanding the issuer or 
program manager's maintenance of policies and procedures reasonably 
designed to avoid the marketing of the general-purpose reloadable cards 
as gift cards or gift certificates.
    ii. Same facts as in i., except that the issuer or program manager 
sets up a single promotional display at the retailer on which a variety 
of prepaid cards are sold, including store gift cards, general-purpose 
reloadable cards, and wireless telephone cards. A sign stating ``Gift 
Cards'' appears prominently at the top of the display. The issuer or 
program manager does not qualify for the exclusion in Sec.  
205.20(b)(2) with respect to the general-purpose reloadable card 
because the issuer or program manager does not maintain policies and 
procedures reasonably designed to avoid the marketing of the general-
purpose reloadable cards as gift cards or gift certificates.
Paragraph 20(b)(4)--Not Marketed to the General Public
    1. Marketed to the general public. A card, code, or other device is 
marketed to the general public if the potential use of the card, code, 
or other device is directly or indirectly offered, advertised, or 
otherwise promoted to the general public. A card, code, or other device 
may be marketed to the general public regardless of the advertising 
medium, including television, radio, newspaper, the Internet, or 
signage. In addition, the method of distribution by itself is not 
dispositive in determining whether a card, code, or other device is 
marketed to the general public. Factors that may be considered in 
determining whether the exclusion applies to a particular card, code, 
or other device include the means or channel through which the card, 
code, or device may be obtained by a consumer, the subset of consumers 
that are eligible to obtain the card, code or device, and whether the 
availability of the card, code, or device is advertised or otherwise 
promoted in the marketplace.
    2. Examples illustrating exclusion for cards, codes, or other 
devices ``not marketed to the general public.'' The following examples 
illustrate application of the exclusion in Sec.  205.20(b)(4) for 
cards, codes, or other devices not marketed to the general public.
    i. A merchant sells its gift cards at a discount to a business 
which may give them to employees or loyal consumers as incentives or 
rewards. In determining whether the gift card falls within the 
exclusion in Sec.  205.20(b)(4), the merchant must consider whether the 
card is of a type that is advertised or made available to consumers 
generally or can be obtained elsewhere. If the card can also be 
purchased through retail channels, the exclusion in Sec.  205.20(b)(4) 
does not apply, even if the consumer obtained the card from the 
business as an incentive or reward. See, however, Sec.  205.20(b)(3).
    ii. A national retail chain decides to market its gift cards only 
to members of its frequent buyer program. If any member of the general 
public may become a member of the program, the card does not fall 
within the exclusion in Sec.  205.20(b)(4) because the general public 
has the ability to obtain the cards.
    iii. An issuer of prepaid cards advertises a reloadable card to 
teenagers and their parents promoting the card for use by teenagers for 
occasional expenses, schoolbooks and emergencies and by parents to 
monitor spending. Because the card is marketed to and may be sold to 
any member of the general public, the exclusion in Sec.  205.20(b)(4) 
does not apply.
    iv. An insurance company settles a policyholder's claim and 
distributes the insurance proceeds to the consumer by means of a 
prepaid card. Because the prepaid card is simply the means for 
providing the insurance proceeds to the consumer and the availability 
of the card is not advertised to the general public, the exclusion in 
Sec.  205.20(b)(4) applies.
    v. An employer provides a prepaid card to its employees to cover 
travel expenses and per diem. Because the prepaid card is simply the 
means for distributing travel expenses and per diem and the 
availability of the card is not advertised or available to the general 
public, the exclusion in Sec.  205.20(b)(4) applies.
    vi. A merchant provides store credit to a consumer following a 
merchandise return by issuing a prepaid card that clearly indicates 
that the card contains funds for store credit. Because the prepaid card 
is issued for the stated purpose of providing store credit to the 
consumer and the ability to receive refunds by a prepaid card is not

[[Page 61010]]

advertised to the general public, the exclusion in Sec.  205.20(b)(4) 
applies.
    vii. A tax preparation company elects to distribute tax refunds to 
its clients by issuing non-reloadable prepaid cards, but does not 
advertise or otherwise promote the ability to receive proceeds in this 
manner. Because the prepaid card is simply the mechanism for providing 
the tax refund to the consumer, and the tax preparer does not advertise 
the ability to obtain tax refunds by a prepaid card, the exclusion in 
Sec.  205.20(b)(4) applies. However, if the tax preparer promotes the 
ability to receive tax refund proceeds through a prepaid card as a way 
to obtain ``faster'' access to the proceeds, the exclusion in Sec.  
205.20(b)(4) does not apply.
Paragraph 20(b)(5)--Issued in Paper Form Only
    1. Exclusion explained. To qualify for the exclusion in Sec.  
205.20(b)(5), the sole means of issuing the card, code, or other device 
must be in a paper form. Thus, the exclusion generally applies to 
certificates issued in paper form where solely the paper itself may be 
used to purchase goods or services. A card, code or other device is not 
issued solely in paper form simply because it may be reproduced or 
printed on paper. For example, a bar code or card or certificate number 
sent electronically to a consumer and redeemable for goods and services 
is not issued in paper form, even if it may be reproduced or otherwise 
printed on paper by the consumer. Similarly, an on-line retailer may 
electronically mail a certificate redeemable for goods or services to a 
consumer, which the consumer could print out on a home printer. In 
these circumstances, although the consumer might hold a paper facsimile 
of the card, code, or other device, the exclusion does not apply 
because the information necessary to redeem the value was initially 
issued in electronic form. However, a paper certificate that bears a 
bar code or account number may fall within the exclusion in Sec.  
205.20(b)(5) if the bar code or account number is not issued in any 
form other than on the paper. In addition, the exclusion in Sec.  
205.20(b)(5) would continue to apply in circumstances where an issuer 
replaces a gift certificate that was initially issued in paper form 
with a card or electronic code (for example, to replace a lost paper 
certificate).
Paragraph 20(b)(6)--Redeemable Solely for Admission to Events or Venues
    1. Examples. The exclusion for payment cards, codes, or other 
devices that are redeemable solely for admission to events or venues at 
a particular location or group of affiliated locations generally 
applies to cards, codes, or other devices that are not redeemed for a 
specified monetary value, but rather for admission for entry to an 
event or venue. The exclusion also covers a card, code, or other device 
that is usable to purchase of goods or services purchased in addition 
to entry into the event or the venue, either at the event or venue or 
at an affiliated location or location in geographic proximity to the 
event or venue. The following examples illustrate the scope of Sec.  
205.20(b)(6):
    i. A consumer purchases a prepaid card that entitles the holder to 
a ticket for entry to an amusement park. The prepaid card does not 
state a monetary value and may only be used for entry to the park. The 
card qualifies for the exclusion in Sec.  205.20(b)(6) because it is 
redeemable solely for admission or entry to an event or venue.
    ii. Same facts as in i., except that the gift card also entitles 
the holder of the gift card to a dollar amount that can be applied 
towards the purchase of food and beverages or goods or services at the 
park or at nearby affiliated locations. The card qualifies for the 
exclusion in Sec.  205.20(b)(6) because it is redeemable for admission 
or entry and for goods or services in conjunction with that admission.
    iii. A consumer purchases a $25 gift card that the holder of the 
gift card can use to make purchases at a merchant but alternatively can 
also apply the value on the card towards the cost of admission to the 
merchant's affiliated amusement park. The card is not eligible for the 
exclusion in Sec.  205.20(b)(6) because it is not redeemable solely for 
the admission or ticket itself (or for goods and services purchased in 
conjunction with such admission). The card meets the definition of 
``store gift card'' and is therefore subject to the substantive and 
disclosure requirements of Sec. Sec.  205.20(d), (e), and (f), unless a 
different exclusion applies.
    iv. A consumer purchases a gift card that is redeemable for a 
particular service such as a spa treatment or for a one-night hotel 
stay. The card is not eligible for the exclusion in Sec.  205.20(b)(6) 
because it is not redeemable for admission to an event or venue (in 
this case, the spa or hotel), but instead for a specified service at 
the spa or hotel. The card meets the definition of ``store gift card'' 
and is therefore subject to the substantive and disclosure requirements 
of Sec. Sec.  205.20(d), (e), and (f), unless a different exclusion 
applies.
    v. A consumer purchases a gift card that is redeemable solely for a 
one-year membership to a buyer's club or warehouse, or to a gym. The 
card falls within the exclusion in Sec.  205.20(b)(6) because it is 
redeemable solely for membership to the club or gym and the membership 
is necessary for entry or admission to the club or gym. The exclusion 
would not apply, however, if the card has value that could be applied 
either to membership or for goods or services at the warehouse or gym.
20(c) Form of Disclosures
Paragraph 20(c)(1)--Clear and Conspicuous
    1. Clear and conspicuous standard. All disclosures required by this 
section must be clear and conspicuous. Disclosures are clear and 
conspicuous for purposes of this section if they are readily 
understandable and, in the case of written and electronic disclosures, 
the location and type size are readily noticeable to consumers. 
Disclosures need not be located on the front of the certificate or card 
to be considered clear and conspicuous. Disclosures are clear and 
conspicuous for the purposes of this section if they are in a print 
that contrasts with and is otherwise not obstructed by the background 
on which they are printed. For example, disclosures on a card or 
computer screen are not likely to be conspicuous if obscured by a logo 
printed in the background. Similarly, disclosures on the back of a card 
that are printed on top of indentations from embossed type on the front 
of the card are not likely to be conspicuous if it obstructs the 
readability of the type. To the extent permitted, oral disclosures meet 
the standard when they are given at a volume and speed sufficient for a 
consumer to hear and comprehend them.
    2. Abbreviations and symbols. Disclosures may contain commonly 
accepted or readily understandable abbreviations or symbols, such as 
``mo.'' for month or a ``/'' to indicate ``per.'' Under the clear and 
conspicuous standard, it is sufficient to state, for example, that a 
particular fee is charged ``$2.50/mo. after 12 mos.''
Paragraph 20(c)(2)--Format
    1. Electronic disclosures. Disclosures provided electronically 
pursuant to this section are not subject to compliance with the 
consumer-consent and other applicable provisions of the Electronic 
Signatures in Global and National Commerce Act (E-Sign Act) (15 U.S.C. 
7001 et seq.). Electronic disclosures may not be provided through a 
hyperlink or in another manner by which the purchaser can bypass the 
disclosure. An issuer or vendor is not required to

[[Page 61011]]

confirm that the consumer has read the electronic disclosures.
    2. Non-physical certificates and cards. If no certificate or card 
is issued, the disclosures must accompany the code, confirmation, or 
other written or electronic document provided to the consumer.
Paragraph 20(c)(3)--Disclosure Prior to Purchase
    1. Method of purchase. The disclosures must be provided before a 
certificate or card is purchased regardless of whether the certificate 
or card is purchased in person, on-line, by telephone, or by other 
means.
20(d) Prohibition on Imposition of Fees or Charges
    1. One-year period. Section 205.20(d) provides, in part, that a 
person may not impose a dormancy, inactivity, or service fee with 
respect to a gift certificate, store gift card, or general-use prepaid 
card until there has been no activity with respect to the certificate 
or card in the one-year period ending on the date on which the fee is 
imposed. The following examples illustrate this rule:
    i. A certificate or card is purchased on January 15 of year one. If 
there has been no activity on the certificate or card since the 
certificate or card was purchased, a dormancy, inactivity, or service 
fee may not be imposed on the certificate or card until January 15 of 
year two.
    ii. A certificate or card is purchased on February 29 of a leap 
year. If there has been no activity on the certificate or card since 
the certificate or card was purchased, a dormancy, inactivity, or 
service fee may not be imposed on the certificate or card until 
February 28 of the following year.
    iii. Same facts as i., and a fee was imposed on January 15 of year 
two. Because no more than one dormancy, inactivity, or service fee may 
be imposed in any given calendar month, the earliest date that another 
dormancy, inactivity, or service fee may be imposed, assuming there 
continues to be no activity on the certificate or card, is February 1 
of year two. A dormancy, inactivity, or service fee is permitted to be 
imposed on February 1 of year two because there has been no activity on 
the certificate or card for the preceding year (February 1 of year one 
through January 31 of year two), and February is a new calendar month.
    iv. Same facts as i., and a fee was imposed on January 15 of year 
two. On January 31 of year two, the consumer uses the card to make a 
purchase. Under this circumstance, another dormancy, inactivity, or 
service fee could not be imposed until January 31 of year three at the 
earliest, assuming there has been no activity on the certificate or 
card since January 31 of year two.
    2. Activity. Any action by a consumer to increase, decrease, or 
otherwise make use of the funds underlying a gift certificate, store 
gift card, or general-use prepaid card constitutes activity for 
purposes of Sec.  205.20(d). For example, the purchase and activation 
of a certificate or card or the reloading of funds onto a store gift 
card or general-use prepaid card constitutes activity. However, neither 
the imposition of a fee, the replacement of an expired, lost, or stolen 
certificate or card, nor a balance inquiry constitutes activity with 
respect to a gift certificate, store gift card, or general-use prepaid 
card.
    3. Relationship between Sec. Sec.  205.20(d)(2) and (c)(3). 
Sections 205.20(d)(2) and (c)(3) contain similar, but not identical, 
disclosure requirements. Section 205.20(d)(2) requires the disclosure 
of dormancy, inactivity, and service fees on a certificate or card. 
Section 205.20(c)(3) requires that an issuer or vendor of such 
certificate or card disclose to a consumer any dormancy, inactivity, 
and service fees associated with the certificate or card before such 
certificate or card may be purchased. Depending on the context, a 
single disclosure that meets the clear and conspicuous requirements of 
both Sec. Sec.  205.20(d)(2) and (c)(3) may be used to disclose a 
dormancy, inactivity, or service fee. For example, if the disclosures 
on a certificate or card, required by Sec.  205.20(d)(2), are visible 
to the consumer without having to remove packaging or other materials 
sold with the certificate or card, for a purchase made in person, the 
disclosures also meet the requirements of Sec.  205.20(c)(3). 
Otherwise, a dormancy, inactivity, or service fee may need to be 
disclosed multiple times or in multiple locations to satisfy the 
requirements of Sec. Sec.  205.20(d)(2) and (c)(3). For example, if the 
disclosures on a certificate or card, required by Sec.  205.20(d)(2), 
are obstructed by packaging or other materials sold with the 
certificate or card, for a purchase made in person, they also must be 
disclosed on the packaging sold with the certificate or card or in 
other manner visible to the consumer to meet the requirements of Sec.  
205.20(c)(3).
    4. Relationship between Sec. Sec.  205.20(d)(2), (e)(3), and 
(f)(2). In addition to any disclosures required under Sec.  
205.20(d)(2), any applicable disclosures under Sec. Sec.  205.20(e)(3) 
and (f)(2) of this section must also be provided on the certificate or 
card.
    5. One fee per month. Under Sec.  205.20(d)(3), no more than one 
dormancy, inactivity, or service fee may be imposed in any given 
calendar month. For example, if a dormancy fee is imposed on January 1, 
following a year of inactivity, and a consumer makes a balance inquiry 
on January 15, a balance inquiry fee may not be imposed at that time 
because a dormancy fee was already imposed earlier that month and a 
balance inquiry fee is a type of service fee. If, however, the dormancy 
fee could be imposed on January 1, following a year of inactivity, and 
the consumer performs a balance inquiry on January 1, the person 
assessing the fees may choose whether to impose the dormancy fee or the 
balance inquiry fee on January 1. The restriction in Sec.  205.20(d)(3) 
does not apply to any fee that is not a dormancy, inactivity, or 
service fee. For example, assume a service fee is imposed on January 1, 
following a year of inactivity. If a consumer cashes out the funds on a 
general-use prepaid card on January 15, a cash-out fee may be imposed 
at that time because a cash-out fee is not a dormancy, inactivity, or 
service fee.
20(e) Prohibition on Sale of Gift Certificates or Cards With Expiration 
Dates
Alternative A
    1. Disclosure of funds expiration--date not required. Section 
205.20(e)(3)(i) does not require disclosure of the precise date the 
funds will expire. It is sufficient to disclose, for example, ``Funds 
expire 5 years from the date funds last loaded to the card.''; ``Funds 
can be used 5 years from the date money was last added to the card.''; 
or ``Funds do not expire.''
    2. Disclosure not required if no expiration date. If the 
certificate or card and underlying funds do not expire, the disclosure 
required by Sec.  205.20(e)(3)(i) need not be stated on the certificate 
or card.
    3. Reference to toll-free telephone number and Web site. If a 
certificate or card does not expire, or if the underlying funds are not 
available after the certificate or card expires, the disclosure 
required by Sec.  205.20(e)(3)(ii) need not be stated on the 
certificate or card. See, however, Sec.  205.20(f)(2).
    4. Relationship to Sec.  226.20(f)(2). The same toll-free telephone 
number and Web site may be used to comply with Sec. Sec.  
226.20(e)(3)(ii) and (f)(2). Neither a toll-free number nor a Web site 
must be maintained or disclosed on a certificate or card if no fees are 
imposed in

[[Page 61012]]

connection with the certificate or card, and the certificate or card 
and underlying funds do not expire.
    5. Distinguishing between certificate or card expiration and funds 
expiration. If applicable, Sec.  205.20(e)(3)(iii) requires a 
disclosure to be made on the certificate or card that notifies a 
consumer that the certificate or card expires, but the underlying funds 
either do not expire or expire later than the certificate or card, and 
that the consumer may contact the issuer for a replacement card. The 
disclosure must be made with equal prominence and in close proximity to 
the certificate or card expiration date. In the case of a certificate 
or card, close proximity means that the disclosure must be on the same 
side as the certificate or card expiration date. If the disclosure is 
the same type size and is located immediately next to or directly above 
or below the certificate or card expiration date, without any 
intervening text or graphical displays, the disclosures would be deemed 
to be equally prominent and in close proximity. The disclosure need not 
be embossed on the certificate or card to be deemed equally prominent, 
even if the expiration date is embossed on the certificate or card. The 
disclosure may state on the front of the card, for example, ``Valid 
thru 09/2016. Call for new card.''; ``Active thru 09/2016. Call for 
replacement card.''; or ``Call for new card after 09/2016.''
    6. Relationship between Sec. Sec.  205.20(d)(2), (e)(3), and 
(f)(2). In addition to disclosures required under Sec.  205.20(e)(3), 
any applicable disclosures under Sec. Sec.  205.20(d)(2) and (f)(2) of 
this section must also be provided on the certificate or card.
    7. Replacement of a lost or stolen certificate or card not 
required. Section 205.20 does not require the replacement of a 
certificate or card that has been lost or stolen.
    8. Date of issuance or loading. A certificate or card is not issued 
or loaded with funds until the certificate or card is activated for 
use.
Alternative B
    1. Reasonable opportunity. Under Sec.  205.20(e)(1), no person may 
sell or issue a gift certificate, store gift card, or general-use 
prepaid card with an expiration date, unless there are policies or 
procedures in place to ensure that a consumer has a reasonable 
opportunity to purchase a certificate or card with at least five years 
remaining until the certificate or card expiration date. The following 
examples illustrate reasonable and unreasonable opportunities for 
consumers to purchase a certificate or card with at least five years 
remaining until the certificate or card expiration date:
    i. A card would comply with Sec.  205.20(e)(1) if it is printed 
with a card expiration date six years from the date it was produced and 
is on a display rack of a retail store within six months of the date 
the card was produced.
    ii. A card would comply with Sec.  205.20(e)(1) if it is printed 
with a card expiration date seven years from the date it was produced 
and is on a display rack of a retail store within one year and six 
months of the date the card was produced, the card would comply with 
Sec.  205.20(e)(1).
    iii. A card would not comply with Sec.  205.20(e)(1) if it is 
printed with a card expiration date six years from the date it was 
produced and is stored in a distribution warehouse for more than one 
year after the date the card was produced.
    2. Disclosure of funds expiration--date not required. Section 
205.20(e)(3)(i) does not require disclosure of the precise date the 
funds will expire. It is sufficient to disclose, for example, ``Funds 
expire 5 years from the date funds last loaded to the card.''; ``Funds 
can be used 5 years from the date money was last added to the card.''; 
or ``Funds do not expire.''
    3. Disclosure not required if no expiration date. If the 
certificate or card and underlying funds do not expire, the disclosure 
required by Sec.  205.20(e)(3)(i) need not be stated on the certificate 
or card.
    4. Reference to toll-free telephone number and Web site. If a 
certificate or card does not expire, or if the underlying funds are not 
available after the certificate or card expires, the disclosure 
required by Sec.  205.20(e)(3)(ii) need not be stated on the 
certificate or card. See, however, Sec.  205.20(f)(2).
    5. Relationship to Sec.  226.20(f)(2). The same toll-free telephone 
number and Web site may be used to comply with Sec. Sec.  
226.20(e)(3)(ii) and (f)(2). Neither a toll-free number nor a Web site 
must be maintained or disclosed if no fees are imposed in connection 
with a certificate or card, and the certificate or card and underlying 
funds do not expire.
    6. Distinguishing between certificate or card expiration and funds 
expiration. If applicable, a disclosure must be made on the certificate 
or card that notifies a consumer that the certificate or card expires, 
but the funds either do not expire or expire later than the certificate 
or card, and that the consumer may contact the issuer for a replacement 
card. The disclosure must be made with equal prominence and in close 
proximity to the certificate or card expiration date. In the case of a 
certificate or card, close proximity means that the disclosure must be 
on the same side as the certificate or card expiration date. If the 
disclosure is the same type size and is located immediately next to or 
directly above or below the certificate or card expiration date, 
without any intervening text or graphical displays, the disclosures 
would be deemed to be equally prominent and in close proximity. The 
disclosure need not be embossed on the certificate or card to be deemed 
equally prominent, even if the expiration date is embossed on the 
certificate or card. The disclosure may state on the front of the card, 
for example, ``Valid thru 09/2016. Call for new card.''; ``Active thru 
09/2016. Call for replacement card.''; or ``Call for new card after 09/
2016.''
    7. Relationship between Sec. Sec.  205.20(d)(2), (e)(3), and 
(f)(2). In addition to any disclosures required to be made under Sec.  
205.20(e)(3), any applicable disclosures under Sec. Sec.  205.20(d)(2) 
and (f)(2) must also be provided on the certificate or card.
    8. Replacement of a lost or stolen certificate or card not 
required. Section 205.20 does not require the replacement of a 
certificate or card that has been lost or stolen.
    9. Date of issuance or loading. A certificate or card is not issued 
or loaded with funds until the certificate or card is activated for 
use.
20(f) Additional Disclosure Requirements for Gift Certificates or Cards
    1. Reference to toll-free telephone number and Web site. If a 
certificate or card does not have any fees, the disclosure required by 
Sec.  205.20(f)(2) need not be stated on the certificate or card. See, 
however, Sec.  205.20(e)(3)(ii).
    2. Relationship to Sec.  226.20(e)(3)(ii). The same toll-free 
telephone number and Web site may be used to fulfill Sec. Sec.  
226.20(e)(3)(ii) and (f)(2). Neither a toll-free number nor a Web site 
must be maintained or disclosed if no fees are imposed in connection 
with a certificate or card, and the certificate or card and underlying 
funds do not expire.
    3. Relationship between Sec. Sec.  205.20(d)(2), (e)(3), and 
(f)(2). In addition to any disclosures required to be made pursuant to 
Sec.  205.20(f)(2), any applicable disclosures under Sec. Sec.  
205.20(d)(2) and (e)(3) must also be provided on the certificate or 
card.

    By order of the Board of Governors of the Federal Reserve 
System, November 13, 2009.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. E9-27717 Filed 11-19-09; 8:45 am]
BILLING CODE 6210-01-P