House Study Bill 201 SENATE/HOUSE FILE BY (PROPOSED TREASURER OF STATE BILL) Passed Senate, Date Passed House, Date Vote: Ayes Nays Vote: Ayes Nays Approved A BILL FOR 1 An Act relating to the issuance of gift cards and gift 2 certificates, including providing for abandonment, 3 establishing restrictions on fees and charges, prohibiting 4 expiration dates and other restrictive terms, and making 5 penalties applicable. 6 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 7 TLSB 1215XD 82 8 rn/gg/14 PAG LIN 1 1 Section 1. NEW SECTION. 555D.1 DEFINITIONS. 1 2 As used in this chapter, unless the context otherwise 1 3 requires: 1 4 1. "Gift card" means an electronic payment instrument in 1 5 the form of a plastic card or similar physical medium, 1 6 commonly known as a stored value or prepaid card, in which the 1 7 monetary value is recorded on the card itself or at a central 1 8 database, and which represents a promise by the issuer of the 1 9 card that consumer goods, services, or whatever else the 1 10 issuer provides will be rendered to the bearer of the 1 11 instrument in exchange for monetary value stated or stored on 1 12 or credited to the instrument, but excludes a debit card 1 13 linked to a deposit account in a banking or financial 1 14 organization, a payroll debit card, a government benefit card, 1 15 a flexible spending card, an insurance claim card, an employee 1 16 reward card, a travel expense card, a transportation card, and 1 17 similar electronic payment instruments. 1 18 2. "Gift certificate" means a payment instrument in paper 1 19 or electronic form that represents the promise of the issuer 1 20 of the certificate that goods, services, or whatever else the 1 21 issuer provides will be rendered to the bearer of the 1 22 certificate up to the value of the certificate in the amount 1 23 of money stated on the face of the certificate. 1 24 3. "Issuer" means the retailer, merchant, or vendor who 1 25 issued a gift card or gift certificate, or a provider of 1 26 services, that has the obligation to accept the gift card or 1 27 gift certificate as payment and deliver goods, provide 1 28 services, or render whatever else may be purchased by the card 1 29 or certificate. 1 30 Sec. 2. NEW SECTION. 555D.2 EXPIRATION DATES PROHIBITED 1 31 == EXCEPTIONS. 1 32 1. Except as provided in subsection 2, an issuer of a gift 1 33 card or gift certificate in this state shall not: 1 34 a. Issue a gift card or gift certificate that has an 1 35 expiration date or enforce an expiration date against the 2 1 bearer of a gift card or gift certificate. 2 2 b. Assess or deduct any charge or fee from the monetary 2 3 value of a gift card or gift certificate, including but not 2 4 limited to a service, maintenance, cash=out, reactivation, 2 5 replacement card, dormancy, or inactivity fee. 2 6 c. If a transaction is made with a gift certificate for an 2 7 amount that is less than the value of the certificate, fail or 2 8 refuse to do one of the following: 2 9 (1) Pay the unused balance of the certificate's value to 2 10 the bearer. 2 11 (2) Issue to the bearer a new card or certificate for the 2 12 unused value. 2 13 d. If the remaining value of a gift card or gift 2 14 certificate is less than five dollars, fail or refuse to 2 15 redeem that card or certificate in cash for its remaining 2 16 value on demand of the bearer. 2 17 e. If a gift card or gift certificate remains unused or 2 18 unredeemed for more than three years after it was sold or 2 19 issued, fail or refuse to administer the unused or unredeemed 2 20 proceeds of the card or certificate in accordance with the 2 21 provisions of chapter 556. 2 22 2. a. A person or entity may enforce against the bearer 2 23 an expiration date in a gift card or a gift certificate in 2 24 circumstances where: 2 25 (1) The gift card or gift certificate is issued pursuant 2 26 to an awards, loyalty, or promotional program or in other 2 27 similar circumstances where no money or other thing of value 2 28 is given in exchange for the card or certificate. 2 29 (2) The gift card or gift certificate is donated to a 2 30 charitable organization without any money or other thing of 2 31 value being given in exchange for the card or certificate and 2 32 the charitable organization uses the card or certificate 2 33 solely to provide its charitable services or for its 2 34 fund=raising activities. 2 35 b. An expiration date displayed on a gift card or gift 3 1 certificate which was issued or donated as described in 3 2 paragraph "a", subparagraph (1) or (2), shall be disclosed 3 3 clearly and legibly on the gift card or gift certificate in a 3 4 location on the card or certificate where it is visible to any 3 5 purchaser before purchasing the card or certificate, and shall 3 6 be at least one year from the date the gift card or gift 3 7 certificate is issued and delivered to the bearer. 3 8 3. The provisions of subsection 1 shall not apply to a 3 9 gift card or gift certificate issued by a banking or financial 3 10 organization, as defined in section 556.1, that is organized 3 11 under the federal National Bank Act, 12 U.S.C. } 12, et seq., 3 12 or the federal Home Owners' Loan Act, 12 U.S.C. } 1461, et 3 13 seq., if all of the following conditions are met: 3 14 a. The federal statutory law and regulations applicable to 3 15 the gift card or gift certificate explicitly permit the 3 16 banking or financial organization to issue the gift card or 3 17 the gift certificate and to impose the expiration dates and 3 18 the type and amount of service fees that the banking or 3 19 financial organization imposes, in the manner in which the 3 20 banking or financial organization has done so. 3 21 b. The banking or financial organization alone has the 3 22 liability to the purchaser or bearer of the gift card or gift 3 23 certificate to redeem the card or certificate. 3 24 c. The contractual relationship in regard to the gift card 3 25 or the gift certificate is solely between the issuing banking 3 26 or financial organization and the purchaser or bearer of the 3 27 card or certificate. 3 28 d. Only the banking or financial organization establishes 3 29 the terms and conditions of the gift card or gift certificate. 3 30 e. Only the banking or financial organization charges, 3 31 retains, and profits from any fees associated with the gift 3 32 card or gift certificate. 3 33 Sec. 3. NEW SECTION. 555D.3 PENALTIES. 3 34 A violation of this chapter is an unlawful practice under 3 35 section 714.16, and is additionally subject to the penalty 4 1 provisions of section 537.5201. 4 2 Sec. 4. NEW SECTION. 556.8A GIFT CARDS AND GIFT 4 3 CERTIFICATES. 4 4 1. For purposes of this section, unless the context 4 5 otherwise requires: 4 6 a. "Domicile" means the state of incorporation of an 4 7 issuer that is a corporation and the state of the principal 4 8 place of business of an issuer that is not a corporation. 4 9 b. "Gift card", "gift certificate", and "issuer" mean the 4 10 same as defined in section 555D.1. 4 11 2. A gift card or gift certificate that remains unused or 4 12 unredeemed for more than three years after it was sold or 4 13 issued is presumed abandoned unless the owner or bearer of 4 14 that card or certificate has within three years either: 4 15 a. Increased or decreased the amount of the value stated 4 16 or stored on, credited to, or represented by the card or 4 17 certificate. 4 18 b. Communicated with the issuer of the card or certificate 4 19 concerning the value of or the balance remaining on the card 4 20 or certificate, in writing or by other means as shown in a 4 21 contemporaneous record prepared by or on behalf of the issuer. 4 22 3. The proceeds of a gift card or gift certificate 4 23 presumed abandoned is the monetary value of the card or 4 24 certificate at the time that the card or certificate is 4 25 presumed abandoned. 4 26 4. A gift card or gift certificate that is presumed 4 27 abandoned is subject to the custody of the treasurer of state 4 28 in any of the following circumstances: 4 29 a. The last known address of the purchaser or bearer of 4 30 the card or certificate, as shown on the records of the 4 31 issuer, is in this state. 4 32 b. The records of the issuer do not show the identity of 4 33 the purchaser or bearer of the card or certificate, but it is 4 34 established that the last known address of the purchaser or 4 35 bearer is in this state. 5 1 c. The records of the issuer of the card or certificate do 5 2 not show any last known address of the purchaser or bearer and 5 3 the issuer is domiciled in this state. 5 4 d. The records of the issuer show that the last known 5 5 address of the purchaser or bearer is in a state that does not 5 6 provide for the escheat or custodial taking of a gift card or 5 7 gift certificate or is in a foreign country and the issuer is 5 8 domiciled in this state. 5 9 e. The records of the seller or issuer show that the gift 5 10 card or gift certificate was purchased or issued in this 5 11 state, the issuer is domiciled in a state that does not 5 12 provide for the escheat or custodial taking of a gift card or 5 13 gift certificate, and the last known address of the purchaser 5 14 or bearer is unknown or in a state that does not provide for 5 15 the escheat or custodial taking of a gift card or gift 5 16 certificate. 5 17 5. The expiration of any period of time for the use or 5 18 redemption of a gift card or gift certificate issued in a 5 19 state permitting an expiration date shall not prevent an 5 20 unused or unredeemed gift card or gift certificate from being 5 21 presumed abandoned and shall not affect the duty of the issuer 5 22 to report and deliver the proceeds of those unused cards or 5 23 unredeemed certificates to the treasurer of state as provided 5 24 in this chapter. 5 25 6. An issuer may redeem a gift card or gift certificate 5 26 after that card or certificate was presumed abandoned and the 5 27 proceeds delivered into the custody of the treasurer of state, 5 28 and the treasurer of state shall reimburse the issuer as 5 29 provided in section 556.14, subsection 4. 5 30 7. It shall be contrary to public policy for an issuer to 5 31 organize or form a subsidiary business entity to be the issuer 5 32 of its gift cards or gift certificates if doing so would 5 33 result in a disposition of unused or unredeemed gift cards or 5 34 gift certificates other than as provided in this section and 5 35 subject to the custody of the treasurer of state. 6 1 8. This section shall not apply to the following gift 6 2 cards and gift certificates: 6 3 a. Gift cards or gift certificates issued pursuant to an 6 4 awards, loyalty, or promotional program or in other similar 6 5 circumstances where no money or other thing of value is given 6 6 in exchange for the card or certificate. 6 7 b. Gift cards or gift certificates donated to a charitable 6 8 organization without any money or other thing of value being 6 9 given in exchange for the card or certificate and the 6 10 charitable organization uses the card or certificate solely to 6 11 provide its charitable services or for its fund=raising 6 12 activities. 6 13 9. This section does not relieve an issuer of an 6 14 obligation arising prior to the effective date of this Act to 6 15 report and pay the proceeds of an unused gift card or an 6 16 unredeemed gift certificate to the treasurer of state. 6 17 Sec. 5. Section 556.9, subsection 2, Code 2007, is amended 6 18 by striking the subsection. 6 19 EXPLANATION 6 20 This bill relates to the issuance of gift cards and gift 6 21 certificates, and the circumstances under which they shall be 6 22 considered unclaimed property. 6 23 The bill defines a "gift card" as an electronic payment 6 24 instrument in the form of a plastic card or similar physical 6 25 medium, in which the monetary value is recorded on the card or 6 26 at a central database, and which represents a promise by the 6 27 issuer of the card that consumer goods, services, or whatever 6 28 else the issuer provides will be rendered to the bearer of the 6 29 instrument in exchange for the monetary value of other 6 30 electronic payment instruments from the definition. The bill 6 31 defines a "gift certificate" as a payment instrument in paper 6 32 or electronic form that represents the promise of the issuer 6 33 of the certificate that goods, services, or whatever else the 6 34 issuer provides will be rendered to the bearer of the 6 35 certificate up to the value of the certificate. 7 1 The bill prohibits the issuance of a gift card or gift 7 2 certificate in Iowa that has an expiration date or the 7 3 enforcing of an expiration date against the bearer of a gift 7 4 card or gift certificate. The bill also prohibits assessing 7 5 or deducting any charge or fee from the monetary value of a 7 6 gift card or a gift certificate, including but not limited to 7 7 a service, maintenance, cash=out, reactivation, replacement 7 8 card, dormancy, or inactivity fee. Additionally, an issuer 7 9 may not fail or refuse to pay the unused balance or issue a 7 10 new card or certificate for that balance if a transaction is 7 11 made with a gift certificate for an amount that is less than 7 12 the value of the certificate, fail or refuse to redeem a card 7 13 or certificate in cash for a remaining value of less than five 7 14 dollars, or fail or refuse to administer a card or certificate 7 15 which remains unused or unredeemed for more than three years 7 16 after it was sold or issued in accordance with the unclaimed 7 17 property provisions of Code chapter 556. 7 18 The bill provides for exceptions to the prohibition against 7 19 expiration dates. The bill provides that a gift card or gift 7 20 certificate may be issued with an expiration date if issued 7 21 pursuant to an awards, loyalty, or promotional program or 7 22 similar circumstances where no money or other thing of value 7 23 is given in exchange for the card or certificate, or if 7 24 donated to a charitable organization without any money or 7 25 other thing of value being given in exchange for the card or 7 26 certificate and the charitable organization uses the card or 7 27 certificate solely to provide its charitable services or for 7 28 its fund=raising activities. In either of these situations, 7 29 the bill provides that an expiration date shall be disclosed 7 30 clearly and legibly on the gift card or gift certificate and 7 31 that the expiration date shall be at least one year from the 7 32 date the gift card or gift certificate is issued and delivered 7 33 to the bearer. 7 34 The bill also specifies that the prohibition shall not 7 35 extend to a gift card or gift certificate issued by a banking 8 1 or financial organization organized under the federal National 8 2 Bank Act or the federal Home Owners' Loan Act, if several 8 3 specified conditions are met. 8 4 The bill prescribes that an issuer in violation of these 8 5 provisions shall be subject to the consumer fraud provisions 8 6 of Code section 716.14, and shall additionally be subject to a 8 7 civil action under Code section 537.5201 in which actual 8 8 damages may be recovered and a penalty assessed in an amount 8 9 not less than $100 nor more than $1,000 per violation. 8 10 With reference to Code chapter 556, the bill provides that 8 11 a gift card or gift certificate that remains unused or 8 12 unredeemed for more than three years after it was sold or 8 13 issued is presumed abandoned unless the owner or bearer has 8 14 within the three years either increased or decreased the 8 15 amount of the value stated or stored on, credited to, or 8 16 represented by the card or certificate; or communicated with 8 17 the issuer of the card or certificate concerning the value of 8 18 or the balance remaining on the card or certificate. If 8 19 presumed abandoned, the bill states that the proceeds of a 8 20 gift card or certificate shall be the monetary value of the 8 21 card or certificate at the time that it is presumed abandoned. 8 22 The bill specifies the various instances in which the 8 23 treasurer of state shall assume custody of the gift card or 8 24 certificate presumed abandoned, and provides that an issuer 8 25 may redeem a gift card or gift certificate after that card or 8 26 certificate was presumed abandoned and the proceeds delivered 8 27 into the custody of the treasurer of state, with reimbursement 8 28 by the treasurer of state. The bill states that an issuer 8 29 shall not form a subsidiary business entity to be the issuer 8 30 of its gift cards or gift certificates if doing so would 8 31 result in a disposition of unused or unredeemed gift cards or 8 32 gift certificates other than as provided in the bill and 8 33 subject to the custody of the treasurer of state. The bill 8 34 provides an exception from these unclaimed property provisions 8 35 for gift cards or certificates issued pursuant to an awards, 9 1 loyalty, or promotional program or donated to a charitable 9 2 organization. The bill states that the new provisions 9 3 relating to Code chapter 556 do not relieve an issuer of an 9 4 obligation arising prior to the effective date of the bill to 9 5 report and pay the proceeds of an unused gift card or an 9 6 unredeemed gift certificate to the treasurer of state. 9 7 The bill repeals a provision in Code chapter 556 which 9 8 currently permits the deduction from the face value of a gift 9 9 certificate a charge imposed due to the failure of the owner 9 10 of the gift certificate to present the gift certificate in a 9 11 timely manner if a valid and enforceable written contract 9 12 exists between the issuer and the owner of the gift 9 13 certificate and the issuer regularly imposes such charges and 9 14 does not regularly reverse or otherwise cancel them. 9 15 LSB 1215XD 82 9 16 rn:nh/gg/14.2