Fed reading the fine print on gift cards

The Federal Reserve this week proposed rules that would protect gift-card users from exorbitant fees and other restrictions. A move aimed at protecting the 95% of Americans the Fed says use them.

"Concerns have been raised regarding the amount of fees associated with gift cards, the expiration dates of gift cards and the adequacy of disclosures," the Fed said. "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."
This proposed rule, slated to take effect Aug. 22, 2010, won't help Black Friday shoppers this year. But it's one that will make it less stressful in the future to give a gift card.

One of the proposed rules will be good news to those who like to hang on to their cards, amassing many to splurge on a big ticket item. It would require gift cards remain valid for at least five years from the purchase date.

Service and inactivity fees, things that are currently squeezed into the fine print of many gift cards, would not be charged until the card is inactive for at least one year.

The rules would cover retail gift cards for use at stores like Pottery Barn and Home Depot as well as branded ones sporting VISA and American Express logos, that can be used anywhere those cards are accepted.

More than 40 states have already enacted their own gift-card laws, the Fed said, although the rules vary widely. In California, most gift cards are prohibited from having expiration dates or fees.

Some retailers like Macy's have already preemptively adopted policies similar to what the proposed rule would enforce. Macy's gift cards purchased on or after 2/3/08 do not have an expiration date. Electronics retailer,Best Buy gift cards also have no expiration date, and do not have inactivity or other usage fees.