Fed Cracks Down On Gift Card Abuses

JEANNINE AVERSA

WASHINGTON (AP) — The Federal Reserve on Monday proposed new rules to protect consumers from unexpected costs or restrictions on gift cards.

More than 95 percent of Americans have received or purchased gift cards, the Fed said.

Under the proposed rule, consumers must have at least five years to use the gift cards before they expire. The Fed also said service or inactivity fees can be imposed only under certain conditions.

Such fees can be charged if the consumer hasn't used the card for at least a year, if the consumer is given clear disclosures about them and no more than one fee is charged a month, the Fed said.

The Fed was directed to take the action under a law Congress passed in May.

"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," the Fed explained. "Even where fees or terms are disclosed on or with the card, the disclosures may not be clear and conspicuous."