As we reported earlier, the comment period for comments on the Federal Reserve’s proposed prepaid card rules expired yesterday. The two leading submissions (one by a group of consumer advocates, the other by a prepaid card association) provide interesting reading. Not surprisingly, the two sets of comments take an opposing view on one of the main items in the proposed rules – the expiration of gift cards.
In the Federal Reserve’s request for comments, the Board of Governors specifically requested comments on which of two alternative rules for dealing with gift card expiration dates should be adopted – “Alternative A” and “Alternative B”.
Alternative A generally would require that all card expiration dates be 5 years after the date the card is issued or sold. (Proposed Rule Section 205.20(e) – Alternative A).
Alternative B generally allows cards with printed expiration dates of less than 5 years to be offered for sale, provided the issuer has policies and procedures in place that will ensure consumers have a reasonable opportunity to purchase gift cards with at least 5 years remaining before the expiration date. (Proposed Rule Section 205.20(e)-Alternative B).
Seems pretty straightforward, right? Apparently not. The choice of provisions elicited two opposing views from the consumer groups (including Consumers Union, Consumer Action, Consumer Federation of America and the National Consumer Law Center) and the prepaid association (the Network Branded Prepaid Card Association or NBPCA).
The NBPCA argued that Alternative B is the better choice, as Alternative A “would likely pose technological challenges to sellers of gift cards, as they would need to determine at the point of sale and prior to purchase if enough time remains before the plastic expiration date…. it may also inconvenience customers (those purchasing gift cards or merely in line behind such persons) if sellers need to manually review cards’ expiration dates before the purchase transaction is completed.” (NBPCA comments at pages 3-4).
The Consumer Groups took the opposite view, favoring Alternative A stating that “Since most consumers often rely on the imprinted date on the gift card or gift certificate, the expiration date must not reflect a date earlier than the five year period. Thus, it is important that gift cards with expiration dates have at least a five year expiration date from the time the card is sold or issued, and the Board should adopt Alternative A…” (Consumer Group comments at page 5).
The groups didn’t agree on much in their comments.
Tomorrow, we’ll take a look at one of the bigger issues – whether general purpose reloadable prepaid cards should be regulated in the rules.