5Ws: CFPB to Review State Gift Card Laws
As has been widely noted, the federal Consumer Financial Protection Bureau, which was set up as part of 2010’s Dodd-Frank Act, is looking into State unclaimed property laws relating to get cards. Here is the who, what, where, when and why:
Who? The Consumer Financial Protection Bureau, which opened its doors in 2011, and was created by the 2010 Dodd-Frank Act. The CFPB is a federal agency which is primarily responsible for (as the name suggests) consumer protection, financial education, and rulemaking relating to consumer finance activities.
What? According to a press release issued by the agency, the CFPB wants to evaluate whether certain state unclaimed property laws relating to get cards are inconsistent with federal law. Specifically, pursuant to the Credit CARD Act of 2009, most gift and stored value cards are required to be free from expiration for at least 5 years. In some states, however, the dormancy period for gift cards is a shorter period of 2 to 3 years (i.e., after 2 years, the issuer of the card is no longer obligated to honor it, so long as the amount is escheated to the state).
Where? According to the CFPB’s public notice of potential rule making, the agency is specifically concerned with the gift card provisions contained in the Maine and Tennessee Unclaimed Property Acts. In each of these states, stored value cards are generally deemed abandoned (that is, are subject to being reported and remitted to the state) in two years.
When? The CFPB is currently soliciting comments from the public before making its decision. Interested parties can submit comments for consideration within 60 days from the publication of the CFPB’s notice.
Why? The CFPB’s inquiry underscores the fundamentally different viewpoints of the state and federal agencies when it comes to determining what is in the consumer’s best interests. The state unclaimed property agencies are primarily concerned with taking custody of apparently unused funds as quickly as possible, under the presumption that by taking custody of the property quickly, they increase the likelihood that the consumer will eventually reclaim the funds for the state.
The CFPB, on the other hand, is primarily concerned with making sure that the in the consumer’s gift card funds remain valid in the first place. The federal agency would presumably contend that anything which keeps the card active for a longer period of time serves the consumer best.