Since last November, laws regulating the sale of gift cards within the state have protected Michigan consumers. The problem is that every state has its own laws, or no laws at all, regulating the sale and use of gift cards; so if you were sending one to someone out-of-state or purchasing one as you traveled it was buyer beware. The U.S. Federal Reserve recently took action to enact national rules on the sale and use of gift cards that will go into effect in 2010 which are similar to the standards currently set within Michigan.
Gift cards represent the stored monetary value of money on a plastic card through a magnetic strip or microprocessor chip. The two broad categories of gift cards are merchant-issued gift cards or bank-issued gift cards. Neither the Michigan nor federal regulations apply to bank-issued cards, which are the equivalent of giving someone cash or a check for a present. Merchant-issued cards are ones that can be cashed for value at a specifically designated store or restaurant.
Under Michigan law, gift cards issued by merchants cannot expire within five years of purchase. That means a merchant that issues a gift card cannot refuse to accept a gift card for “personal, family, or household use” if you present the card within five years from the time it was purchased. The big exemption to this rule though is that those issued by banks or financial institutions under Michigan law can put an expiration date on a gift card and that card can expire in less than five years. A gift card issued by a bank or financial institution contains an identity symbol for a card network such as American Express, VISA, or MasterCard.
Additionally, as of November 1, 2008, Michigan law prohibits merchants from:
- Changing the terms and conditions of a gift card after the time of purchase;
- Failing to disclose terms and conditions of a gift card before a purchase;
- Refusing to apply the value of a gift card to the purchase price of goods or services if the value of the gift card is less than the full purchase price of the goods or service.
- And a merchant cannot charge inactivity or other service fee and deduct it from the value of the gift card.
So while national regulations won’t be in place for this Christmas, Michigan consumers can be assured that they have some safeguards when locally purchasing a gift card this holiday season.