Consumers who forget about their holiday gift cards until they pop up during spring cleaning can take comfort in a trio of regulations the Federal Reserve announced Tuesday.
The new rules, which go into effect Aug. 22, ban issuers from charging dormancy, inactivity and service fees on gift cards not used within a year of purchase. If fees are tacked on after that, no more than one penalty per month will be allowed. And no extra charges can be attached to any gift cards without "clear and conspicuous disclosures" about them, according to the new rules.
Also, cards must be good for at least five years, according to the Fed's rules, ordered by Congress last year as part of the federal Credit Card Act of 2009.
Local restaurants, from Reata to Fuzzy's Taco Shops, say the changes won't affect operations or bottom lines.
Tod Lewis, general manager of Reata, said its cards can be renewed after 13 consecutive months of inactivity with a $1.50 charge. The chain, which operates restaurants in Fort Worth, including several Stock Show locations, and in Alpine, does not consider card sales as revenue until they are cashed, Lewis said. He figures that about 5 percent are lost before they are redeemed.
Similarly, San Antonio-based Whataburger said it won't be affected by the new rule, noting that its gift cards don't expire and can be reloaded in $5 increments up to $100. Dallas-based Brinker International, which owns Chili's Grill & Bar, Maggiano's Little Italy and On the Border Mexican Grill & Cantina, won't be affected because it does not charge service fees.
At Fuzzy's, "our attitude has been, if you buy it, we'll honor it," said Chuck Bush, managing partner of the chain, which now has eight locations statewide.
The rules cover gift cards from retailers as well as network-branded gift cards from issuers such as American Express. Last year, consumers purchased an estimated $87 billion in gift cards.
"These new rules will curb the abusive fees and early expiration dates that can drain gift cards of their value before they are ever even used," Sen. Charles Schumer, D-N.Y., an ardent advocate of the rules, said in a news release.
But Schumer said he wants them in place sooner than August. "Now that the new rules are finalized, we will work with the Fed to speed up the effective date rather than keep consumers at risk of being ripped off until next summer," he said.
Since November, when the Fed opened the comment period on the rules, more than 230 letters have been filed. Most came from card issuers, card networks and other industry-related groups, but individuals urged the Fed to outlaw fees and expirations.
Already more than 40 states have laws tied to gift cards, mostly restricting fees and related to store cards. Many states, however, do not address branded cards.