Retail Law Update - New York Gift Card Legislation
This month’s Client Alert highlights new legal developments impacting our retail clients that issue gift certificates (including gift cards) in the State of New York. The New York legislature recently amended its general business law (NY CLS Gen. Bus. § 396-i) to require additional gift card disclosures about replacement of lost or stolen gift cards if such gift cards may be replaced (“New Law”). The New Law is effective December 25, 2016.
I. New Gift Card Disclosure Rules
A. Procedure for Replacement of Lost or Stolen Gift Cards
New York’s existing law requires retailers that issue gift cards in New York to state the terms and conditions of the gift card “clearly and conspicuously.” Beginning December 25, 2016, those terms and conditions must include a clear and conspicuous disclosure of the retailer’s “procedure for the replacement of a gift certificate” if the retailer replaces lost or stolen gift cards. If the terms and conditions of your gift cards do not disclose a “procedure” for replacement on the gift card, on the envelope or packaging containing the gift card or on an accompanying document provided with the gift card, the terms and conditions must be revised.
B. Delayed Assessment of Dormancy Fees
While existing law permits retailers to assess monthly service fees on gift cards after the gift card’s thirteenth month of dormancy, the New Law prohibits service fees from being assessed prior to the twenty-fifth month of dormancy. Any assessed service fees must be waived, however, if the holder of the gift card presents the certificate within three years of its issuance.
C. Expiration Dates
The New Law also prohibits a gift card from having an expiration date that is shorter than five years from the date of issuance, or five years from the date on which funds were last loaded on the gift card. Any additional terms and conditions relative to the implementation of the expiration date must also be clearly and conspicuously disclosed on the gift card.
If a retailer fails to comply with the New Law, a civil penalty of $1,000 per violation may be assessed and the retailer could be forced to pay a $2,000 penalty to each plaintiff that was impacted by the violation. In extreme circumstances, the New Law grants New York courts the ability to enjoin a retailer from selling gift cards in New York.
Since the New Law is effective December 25, 2016, it is unlikely that many retailers will have the opportunity to update the terms and conditions of their current gift card stock during the holiday shopping season. Therefore, it is important to make sure that any new orders of gift card stock for 2017 include revised language reflecting the New Law’s disclosure requirements, so that retailers have the ability to argue that changes to comply with the New Law were implemented in good faith as soon as practicably possible.
If adding additional language regarding the procedure for replacement of lost or stolen gift cards is not practicable due to spatial limitations on the back of gift cards, gift card issuers also have the option of including the disclosure on the packaging of the gift card or on an accompanying document provided with the gift card, such as the sales receipt, as long as a toll free telephone number appears on the gift card giving the consumer access to additional information about the terms and conditions. This option may be less desirable for most gift card issuers because it may require additional training of store associates regarding gift card load procedures at the point of sale.
The New Law is intended to apply to any gift card used in New York, regardless of where the gift card was first issued. Thus, gift card issuers considering their options for compliance with the New Law in New York must consider implementing these changes globally rather than just limiting changes to New York locations.
For more information on the New Law or to obtain a copy of it, please contact: