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Christmas in New York: New State Law Restricts Gift Card Fees, Lengthens Expiration Date

Seal_of_New_York_NYIt’s been a bad month for the payments industry in the state of New York. Gov. Andrew Cuomo signed a law Sept. 26 imposing restrictions on gift cards and gift certificates sold in the state. The new law comes just weeks after the New York Department of Labor (DOL) issued a final rule regulating the use of payroll cards. The gift card law goes into effect Dec. 25, 2016, as that is 90 days from the governor’s signing.

The gift card law has lengthened the time cards can go unused before fees can be assessed—from 13 to 25 months. Furthermore, any monthly service fees applied after the 25-month period must be waived if the cardholder uses the gift card within three years from its issue date. The law also mandates that gift cards cannot expire before five years of the issue date and that gift cards’ terms and conditions must be clearly disclosed. Although the legislation doesn’t specify, the law applies to open- and closed-loop gift cards, according to William Schwartz, legislative director for Assemblyman Jeffrey Dinowitz (Dem.), who cosponsored the bill with Sen. Rich Funke (Rep.).

“Businesses selling gift cards have already made the profit of selling it, so there is no reason that a consumer should be penalized with fees for not using it within a specific time frame,” Dinowitz said. “It’s simply unconscionable that a consumer who pays for a gift card in full should lose their investment because they waited to spend it.”

The legislation received overwhelming support in both the senate and the assembly. The bill passed the senate 60-0 and it passed the assembly 144-3. The memo section of the legislation mentions that 20 other states have passed legislation addressing fees on gift cards.

Earlier this month, the N.Y. DOL issued its final rule regulating methods and payment of wages, including the use of payroll cards. The move came despite the financial service industry’s repeated attempts to argue that the rule would make it difficult for payroll card providers to continue to operate in the state and deny workers, especially the un/underbanked, a choice in how they are paid.

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