What You Need to Know About the New CARD Act

In August 2010, Congress passed a new CARD Act that aimed to fix the ‘anti-consumer’ irregularities that surrounded the gift card and pre-paid card industry. Prior to this law being passed, consumers felt cheated by Card issuers and always had to live with hidden fees, unwarranted charges and so on. Not anymore. The Credit Card Accountability, Responsibility and Disclosure ACT of 2009 makes provisions that allow consumers feel more comfortable about purchasing and using gift cards.

The main provisions of the CARD Act are:

1. No more expiration – Prior to the CARD Act, it wasn’t uncommon for gift card holders to find their unused cards useless after a few months because the card has ‘expired’. This always benefited the issuer as they ended up pocketing the monetary value of the card at the consumer’s expense. With the new laws however, even though the gift card itself can expire, the money used to buy or reload a gift card cannot expire and must be use-able for at least five years. During the five year period, the card issuers must either replace expired cards at no charge or refund any balance.

2. Resolution of Fees Charged – One of the biggest consumer complaints was the many fees companies charged card holders. There were many obvious and many hidden fees that often left consumers feeling manipulated. Following the CARD Act, a lot of these fees are now considered unlawful.

Take the recent introduction of the ‘Kardashian Kard’ for example. The prepaid card was created by reality TV show sisters – Kim, Khloe and Kourtney Kardashian last year and received a lot of criticism because of the numerous and ridiculous fees associated with owning them. First of all, to purchase the card and get it working cost about $60, $1 to check your balance, $1.50 to speak to a customer service rep and $2 to make an online payment. Even worse, it would cost you another $6 if you decide to ditch the card and cancel your account.

The new law now states that for one year, inactivity, dormancy and service fees cannot be imposed. The only exception to this provision is if the card has been inactive for a whole year after purchase/activation, and even then, fees cannot be charged more than once every month.

3. Disclosure – The new laws require full disclosure of all fees and contact information on the back of the cards. The gift card must clearly state all inactivity fees, service fees and expiration dates. It must also display a contact number and/or website of the issuer.

These are the main provisions of the new law and to be fair they do tackle a lot of the problems previously associated with the gift card and prepaid card industry. On the other hand, there are still some things card holders need to watch out for despite this CARD Act.

  • Not all gift cards are covered by the Act.  Paper gift certificates, electronic payment codes, phone cards and loyalty or promotional gift cards are not covered.
  • While the CARD Act prohibits a lot of hidden fees on gift cards, it doesn’t stop issuers from placing certain fees on their cards. It’s important for gift card holders to keep a close eye on cards they are holding and make sure they are not being charged unnecessary fees. Purchase fees are the biggest talking points because usually people end up spending more than the face value of the card to buy it and (sometimes) set it up. A website like GiftCardRescue.com has created a platform for people to save up to 30% off the face value of the gift card when buying and also allows people to sell their unwanted gift cards.
  • Some cards will not carry full disclosures. While the CARD Act kicked into effect August 2010, the provision allows for a grace period on full disclosure for cards produced before April 1. The grace period lasts until January 31st, 2011. The grace period was allowed to prevent card issuers from having to destroy up to 100 million cards that had been produced prior to the CARD Act.

Writer Bio: Kwame Kuadey is the CEO and Founder of GiftCardRescue.com, a site for selling unwanted gift cards for cash. Kwame is also editor of Gift Card Blogger, a blog about discounted gift card deals and more.

Topics: Credit Cards

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