Legal-Ease: Laws on gift cards

This year, our nation’s pending supply chain issues along with some health concerns associated with visiting some public places add people to the pre-existing list of folks who typically buy gift cards/certificates and allow the receiver to choose his or her own gifts.

Traditional gift cards like those picked up from displays and kiosks at the entrances/exits of many stores are governed by certain, specific state and federal laws. Those cards may be for specific businesses or restaurants or may be able to be used in various locations (if the card carries a bank logo like “Visa” or “MasterCard”). This column uses the term “gift cards,” even though the law on gift cards also extends to most gift certificates and online codes that unlock financial credits, if money is paid to receive the credit/code.

Gift cards are permitted to have expiration dates. However, federal law requires that expiration dates for gift cards cannot be any sooner than five years from the date of activation of the card.

The gift card company can charge a “dormancy fee” if a card is not used (in whole or in part) within a one-year period, but Ohio law requires that dormancy fees cannot begin to be applied until at least two years from the date of activation of the card.

Any legally permissible dormancy fees are required to be laid out in writing that accompanies the purchased gift card. Even though we know that most people do not read written disclosures like those that are required to accompany gift card purchases, possibly the most helpful legal disclosure requirement is that each gift card must include a telephone number to contact the card issuer about fees, etc.

These laws do not apply to gift cards that are provided as refunds for purchases (i.e. buy this mobile phone, and we will give you a free gift card). Further, telephone-specific cards and many “reloadable” cards are not subject to all of the laws set forth above.

There is also an Ohio-specific law that mirrors federal laws. The significance of the Ohio law is that someone who is harmed by a gift card issuer’s violation of the expiration and dormancy fee law can recover court costs and attorneys’ fees in lawsuits against gift card issuers.

Notably, though, the Ohio law exempts a variety of gift cards from the Ohio rules on expiration dates and dormancy fees. Gift cards sold by charities (like my local, Catholic elementary school) and gift cards given to employees to use only at the employees’ employer are exempt from the Ohio law on this topic. And the “We have not seen you in a while, so here is a $10 credit toward your next oil change” gift cards are not subject to Ohio laws on this subject either, largely because no money was paid for the gift card. Similarly, “percentage-off” or “cash-off” codes like those frequently discussed in social media from retailers like Kohl’s department stores are not subject to the Ohio law.

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By Lee R. Schroeder

Guest Columnist

Lee R. Schroeder is an Ohio licensed attorney at Schroeder Law LLC in Putnam County. He limits his practice to business, real estate, estate planning and agriculture issues in northwest Ohio. He can be reached at [email protected] or at 419-659-2058. This article is not intended to serve as legal advice, and specific advice should be sought from the licensed attorney of your choice based upon the specific facts and circumstances that you face.