FEDERAL CREDIT CARD LAW MAY AFFECT STATION HALF-OFF AND SIMILAR PROMOTIONS
Regulations adopted under the Credit Card Accountability, Responsibility and Disclosure Act (Credit CARD Act) will become effective on August 22, 2010.  The new federal law is primarily aimed at reforming credit card practices, but also contains regulations designed to protect consumers from gift cards and certificates expiring and issuers charging monthly fees for inactive cards.  These “gift card” regulations will apply to popular “half-off” online discount programs promoted by many broadcasters, such as when a radio station sells a $50 restaurant gift certificate to listeners for $25.  The Credit CARD Act states that all parties involved in the sale of gift cards are responsible for compliance, including the issuer, program manager and retailer; therefore, stations selling gift cards and certificates under “half-off” programs need to ensure that the products comply with the Credit CARD Act. Restrictions on Expiration Dates and Service Fees: In general, the new regulations affect two common practices in the gift card industry – expiration dates and inactivity fees or other service charges.  Under the new law, a gift card or certificate cannot expire earlier than five years from the date of issuance and the terms of the expiration must be clearly and conspicuously stated.  No service fee may be charged until a card has been unused for at least one year and the gift card or certificate must clearly state that a fee will be imposed, the amount of the fee and how often the fee will be imposed. Exemptions: The new law provides for six exemptions from the general five-year term imposed by law – and in each case where an issuer avails itself of an exemption, the shorter expiration date must be clearly stated on the card: Cards that are usable solely for telephone services.  This exemption applies to all prepaid cards for long-distance and wireless telephone services, including voice over Internet (VoIP) access time. Reloadable cards that are not marketed as a gift card or gift certificate.  This exemption applies to cards used for school lunch programs, college and university cards, teen cards and insurance cards. Loyalty, award or promotional gift cards.  This exemption applies to gift cards that are not purchased by a consumer, but are instead funded entirely by the entity sponsoring the card program and would exempt most gift cards and certificates used by stations for contest prizes (but not for “half-off” discount programs where the listener pays for the card).  The “gift cards” distributed by retailers entitling loyal customers to, for example, $20 off a $100 purchase would also fall under this exemption. Cards that are not marketed to the general public.  This exemption applies to cards such as those containing insurance proceeds provided by an insurance company to a customer to settle a claim, a card containing per diem travel expenses provided by a business to an employee, a store credit card provided by a retailer to a customer for a return, and a card containing tax refunds provided by a tax preparer to a client. Gift certificates issued in paper form only.  This exemption applies to gift certificates issued in paper form only, although the certificate may contain a bar code that helps the merchant track or validate the certificate.  However, sending a “paper” certificate to a listener by e-mail and allowing the listener to print the certificate on paper voids the exemption; therefore, to take advantage of this exemption, the station would need to deliver the paper certificate in person or by U.S. mail. Cards or gift certificates redeemable solely for admission to an event or venue.  To be exempt, such a certificate may not provide a specific dollar value but may include a dollar amount that can be spent on concessions at the venue.  For example, a card could provide admission to an amusement park and $10 for food and beverage. Inconsistent State Laws: At least 40 states have enacted laws applicable to gift cards.  Be aware that the law that is most favorable to the consumer will apply.  Thus, if state law is more restrictive than the new federal law, the state law applies, and if state law is less restrictive than the new federal law, the federal law applies.  For example, under existing Massachusetts law, a gift card must be valid for at least seven years from the date of issuance.  That state law is more restrictive than the federal law (which requires a five year expiration period).  The Massachusetts law would apply to any dispute. Should you have any questions regarding the applicability of the new regulations to station promotional programs or need assistance in restructuring your station “half-off” programs to comply with the new regulations, we encourage you to contact our office. August 18, 2010
This memorandum is intended only as a general discussion of these issues and should not be regarded as legal advice. We would be pleased to provide additional details or advice about specific situations if desired. Copyright © 2010, Lerman Senter PLLC 2000 K Street NW, Suite 600 | Washington, DC 20006-1809 tel. 202.429.8970 | fax 202.293.7783 | www.lermansenter.com To Unsubscribe: Unsubscribe  |   To Update Client Info: Update Client Info