OCC Issues Gift Card Guidance
October 19, 2006
On August 14, 2006, the Office of the Comptroller of the Currency (OCC) issued bulletin OCC 2006-34, which provides guidance to national banks on a number of disclosure and marketing issues related to gift cards. The OCC is the first federal agency to issue guidance on gift cards and many industry observers view this guidance as a precursor to further regulation and the preemption of state disclosure laws.
Gift cards are stored value cards that are either closed loop (accepted at one particular retailer) or open loop (accepted at multiple retailers). Regardless of the type of gift card, transactions typically involve two consumers: (1) the purchaser of the gift card; and (2) the recipient. Therefore, such transactions present unique issues with respect to the delivery of disclosures. For example, has an issuer of a gift card provided the appropriate disclosures to a recipient if it delivers the disclosures to the purchaser of the card at the time of sale?
In the bulletin, the OCC attempts to clarify these issues by outlining the types of disclosures that it expects a national bank to provide in connection with its gift cards. What follows is a summary of these disclosures.
Basic information that would be important to a recipient’s use of the gift card should be provided on the card itself, or a sticker or tape affixed to the card. This type of information generally includes: (i) the expiration date of the card; (ii) the amount of any monthly maintenance, dormancy, usage or similar fees applicable to the card; and (iii) contact information where the recipient can obtain additional information regarding the card.
Other information that is important to a gift card recipient’s decisions and actions should be provided in a form that the purchaser can provide to the recipient, but does not necessarily need to be on the card itself. This type of information generally includes: (i) the name of the bank that issued the card; (ii) any other fees that may apply to the card; (iii) if and how consumers can receive a replacement card; (iv) where the card can be used; (v) the issuer’s obligation to authorize transactions made with the card; (vi) the importance of tracking the balance remaining on the card; (vii) how the card may be used for split payment and the process for redeeming de minimis remaining balances; (viii) how consumers can receive balances and resolve complaints; and (ix) the issuer’s right to revoke or change the terms of the card agreement.
The OCC also advises national banks to avoid marketing practices that may mislead reasonable consumers as to the terms and conditions applicable to the gift card. For example, the OCC advises that issuers should not advertise that a gift card has “no expiration date” if the monthly maintenance fee on the card can consume the remaining balance.
What’s the Point?
The OCC is the first federal agency to outline disclosures for gift cards. The bulletin may be a precursor to further OCC and other federal regulation and preemption of state disclosure laws. Until such time as regulations are issued, national banks should provide disclosures outlined in the bulletin with their gift cards.
For more information, e-mail Asnardo Garro at asnardo.garro@hklaw.com or call toll free, 1-888-688-8500.