CFPB Seeks Comment on Unused Gift Card Balances

CFPB Seeks Comments on its Draft Strategic Plan

The CFPB is taking comments on its draft strategic plan for 2013-18. The draft strategic plan is available at http://www.consumerfinance.gov/strategic-plan/ and the CFPB would like the public to email comments to StrategyPlanComments@cfpb.gov by October 25, 2012. The strategic plan is a broad overview of the CFPB's goals in the coming years and does not contain specific regulations. Nevertheless, Waller encourages its financial service clients to weigh in and comment on the plan.

CFPB Seeks Comment on Unused Gift Card Balances

by: Christopher A. Wilson

The Consumer Financial Protection Bureau ("CFPB") is currently soliciting comments for consideration as to whether certain unclaimed property provisions in Maine and Tennessee regarding unused balances remaining on gift cards issued by merchants (a) are inconsistent with, and therefore preempted by, gift card expiration provisions in the federal Electronic Fund and Transfer Act ("EFTA"), as implemented by Regulation E, or (b) provide gift card holders with permissible additional protections.

The EFTA provides that, with limited exception, gift certificates (excluding those issued only in paper form), store gift cards, and general-use prepaid cards—all generally referred to herein as "gift cards"—issued by vendors to their consumers must not expire for a minimum of five years. However, many states have enacted unclaimed property statutes providing that gift card balances not utilized for a prescribed period of inactivity—typically between two to five years—are deemed abandoned and must be transferred to the state for safekeeping on behalf of the consumer to whom it belongs. Such statutes have been adopted in Tennessee and Maine, both of which deem gift card balances abandoned after a two-year period of inactivity.1 After transferring unused gift card balances to Tennessee or Maine, vendors are relieved from the obligation to honor the cards and, in such instances, gift card holders must file claims with the state holding the funds in order to receive the remaining gift card balance. Until the submission of a claim, however, states utilize unclaimed property as part of the state operating budgets.

Because unclaimed property statutes in Maine and Tennessee provide for the "presumed abandonment" of unused gift card balances and further relieve gift card issuers from having to honor such gift cards prior to the expiration of the five-year minimum period of time set forth by the EFTA, the CFPB must determine whether the state statutes at issue permissibly provide greater consumer protections than those afforded under the EFTA or instead run afoul of EFTA mandates.

Factors Supporting Claim that State Laws are Inconsistent with the EFTA

In its request for comments, the CFPB acknowledges difficulties that gift card holders might face in obtaining unclaimed property from states. While states generally maintain online databases where property owners can locate assets or funds held by a state as abandoned or unclaimed property, states have historically received low percentages of claims. This likely results in part from...