CARD Act: Loyalty, Award and Promotional Card, Code and Other Device Exemption Authors: Deborah S. Thoren-Peden, Anna M. Graves, Christine A. Scheuneman, Amy L. Pierce, Greg Johnson
Effective August 22, 2010, loyalty, award and promotional “cards, codes and other devices” must comply with strict disclosure requirements set forth in new federal law, or otherwise (at least in most instances) be subject to the new federal law restricting fees on these instruments and prohibiting expiration in less than five years.
On March 23, 2010, the Federal Reserve Board (Board) issued a much-anticipated “Final Rule” implementing Title IV of the federal Credit Card Accountability, Responsibility and Disclosure Act of 2009, which was signed into law by President Obama on May 22, 2009 (collectively the CARD Act). The CARD Act amends the federal Electronic Funds Transfer Act (EFTA), and the Final Rule amends the EFTA’s implementing regulation, Regulation E. It takes effect in less than four months—August 22, 2010.
The CARD Act restricts most fees and expiration dates on prepaid cards. The new law includes six exemptions1 from these requirements. This Advisory, the first of several Advisories on the CARD Act, focuses on one of the exemptions—for “loyalty, award, or promotional” cards, codes and other devices (referred to collectively as “Loyalty/Promo Cards”). Qualifying Loyalty/Promo Cards are not subject to the fee or expiration date restrictions if they include the required disclosures. Many companies which offer or issue Loyalty/Promo Cards may be surprised by the disclosure requirements, detailed below. All persons involved in issuing or distributing Loyalty/Promo Cards should review and potentially revise disclosures that appear on or with Loyalty/Promo Cards.
Loyalty/Promo Cards issued through a loyalty, award or promotional program where the period of eligibility for the program begins after August 21, 2010 must comply with the disclosure requirements to be exempt. State laws that are consistent with the CARD Act are not preempted by the CARD Act, which means the CARD Act provides a minimum floor. State laws that provide greater protection for consumers are not inconsistent with the CARD Act.
- The six exemptions are cards, codes or other devices: 1) useable solely for telephone services; 2) reloadable and not marketed or labeled as a gift card or gift certificate; 3) that are part of loyalty, award or promotional programs; 4) not marketed to the general public; 5) issued in paper form only; or 6) redeemable solely for admission to events or venues at a particular location or group of affiliated locations, or to obtain goods or services in conjunction with admission to such events or venues, at the event or venue or at specific locations affiliated with and in geographic proximity to the event or venue. The Board indicated that the statutory exemptions should be interpreted narrowly to ensure consumers receive full protection contemplated by the CARD Act.
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