On Monday, the Consumer Financial Protection Bureau ("CFPB") announced that it is now accepting complaints regarding prepaid cards, including gift cards and payroll cards, if consumers have disputes, relating to expiration dates, fees, and issuer marketing practices. The CFPB is intended to be a watchdog agency, advocating for consumers in the marketplace.
Consumers will now have another alternative to settle disputes with gift card issuers. The CFPB will also have a means of tracking issuers that are not in compliance with the law. Chronic abusers could be subject to enforcement actions. Furthermore, the CFPB maintains a publicly available database of complaints, which could lead to bad publicity for an otherwise strong brand name. The CFPB complaint system underscores the ongoing need for proactive compliance with both federal and state laws.
The CFPB and Gift Cards
In recent years, it has interpreted the CARD Act of 2009 to require gift card issuers to honor gift cards for five years, even if state law has required reporting unused balances as unclaimed property. The CFPB said that any state laws that relieve the issuer of liability upon reporting gift cards were preempted. The CFPB places the burden on the gift card issuer, not the consumer, of seeking a refund from the state for the first five years. The CARD Act also has specific provisions prohibiting certain fees and requiring disclosures.
The CFPB and Payroll Cards
The complaint system applies not only to gift cards, but also to payroll cards. Companies looking to lower administrative costs from issuing paper checks have turned to reloadable, general use prepaid cards. These cards allow employees that do not have access to or wish to use traditional banking systems to electronically access their wages. Regulation E, among other laws and regulations, prohibit employers from mandating the use of prepaid cards, limit fees and require certain disclosures. Last fall, the CFPB issued a bulletin to remind employers about their duties to employees under Regulation E.
According to Monday's press release, the CFPB plans to issue a proposed rule aimed at increasing federal consumer protections for general purpose reloadable prepaid cards. Barganier will continue to monitor actions taken by the CFPB and other federal agencies to determine their impact on your gift card programs. Barganier recommends annual reviews of gift card programs to maintain continued compliance with federal and state laws and regulations.