The year 2024 has seen a number of legislative developments impacting state gift card compliance issues, including in the unclaimed property and consumer spaces. In particular, states have been actively adopting and changing rules around the escheatment of unused gift card balances, as well as requirements for displaying, packaging, and training employees regarding gift card sales. We discuss the most significant developments from the past year and speculate on what 2025 may hold in store.
Unclaimed Property Developments
Most state unclaimed property laws include provisions applicable to gift cards, gift certificates, and other similar instruments that are redeemable only for goods and services, not cash. However, 37 states expressly exempt such instruments from escheatment or do not have a law requiring escheatment, including significant jurisdictions such as California, Illinois, Florida, Ohio, Pennsylvania, and Texas. Many states premise their exemption on the gift card or gift certificate not containing an expiration date or service/inactivity fees. On the other hand, the remaining 14 jurisdictions (including the District of Columbia) do have laws purporting to require the escheatment of a gift card or gift certificate.
The main gift card unclaimed property development in 2024 occurred in Idaho, which previously had the opposite rule regarding expiration than other states. In particular, Idaho’s unclaimed property law provided an exemption for “[g]ift certificates with an expiration date prominently displayed on their face,” thus presumably requiring the escheatment of nonexpiring gift certificates and gift cards. Idaho’s law also had a de minimis exemption for any intangible property with a value of $50 or less. However, Idaho changed its statute in 2024 (HB 471) and now has an express exemption for gift cards that do not expire or impose fees, bringing it more in line with other states. Along with this statutory change, Idaho eliminated its $50 de minimis exemption. A company that chose to incorporate in Idaho specifically to take advantage of this de minimis exemption (for example, a company that issued a specific type of instrument that may not technically be a gift card or gift certificate but generally had a value under $50) should now consider redomesticating to a different state because holders will no longer be able to rely on the prior de minimis exemption. There are a number of jurisdictions that can be considered for this purpose, depending on the instrument type in question.
Fraud Prevention Developments
Gift card scam prevention acts and guidelines are becoming more prevalent as states attempt to address gift card fraud, which is believed to be a growing concern in the industry. According to the Federal Trade Commission, gift card fraud made up $217 million of the $10.4 billion of total loss due to fraud in 2023.
Over the past two years, legislation aimed at combating gift card-related fraud has been introduced in Delaware, Iowa, Maine, Maryland, Nebraska, New Jersey, New York, Pennsylvania, Rhode Island, and West Virginia. These bills seek to tackle fraud in a variety of ways, including by requiring the retailer to post notice near point-of-sale locations and/or to train employees regarding fraud, as well as by imposing certain requirements for gift card packaging and display. The only states that have enacted such legislation are New York and Rhode Island, in 2023, and Delaware and Maryland, in 2024.
Both the New York (SB 1329) and Rhode Island (S 759) bills require displays of “conspicuous notice” at or near where gift cards are displayed or where the sale occurs, cautioning purchasers about prepaid card scams and instructing purchasers on what to do if they suspect they might be a potential victim of such a scam. Both states provide a model notice (see New York’s model notice and Rhode Island’s model notice), but only Rhode Island apparently requires the use of its model notice for the display. New York’s SB 9900, the New York Gift Certificate Scam Prevention Act, is currently pending and includes additional provisions regarding packaging and training, similar to Maryland’s enacted bill.
Delaware’s bill (HB 317) requires sellers of third-party gift cards to display conspicuous notice of potential gift card scams at or near the location where gift cards are physically displayed.
Maryland’s bill (SB 760) imposes comprehensive notice, packaging, and training requirements for gift cards. Similar to the New York and Rhode Island bills, the Maryland bill requires a conspicuous display of notice. The bill requires the Maryland Office of the Attorney General to provide a model notice, which has not yet been produced as of the date of this advisory. The bill’s provisions affecting open-loop gift cards go into effect on June 1, 2025, and its provisions affecting closed-loop gift cards go into effect on October 1, 2025, so we expect to see a model notice before June 1, 2025. SB 760 also includes packaging requirements and employee training requirements. Specifically, for gift cards sold in stores, the gift card packaging must conceal or cover, in a way that is not easily removed or replaced without signs of tampering, all numeric codes specific to gift card redemption (or, if it is more secure to partially conceal or cover the numeric codes, that is allowed as well). The packaging must also include a warning that states: “Do not sell or purchase if packaging has been broken or indicates tampering.” These requirements do not apply if the merchant chooses to secure the gift cards in a physical location accessible only to the merchant’s employees.
A number of bills are still pending in other states on this subject matter, and we expect additional states to focus on gift card-related fraud prevention measures in 2025.
Other Consumer Protection Developments
States have mostly been focused on fraud-related legislation in 2024, and there were no changes to state laws on consumer protection, including gift card cash-back requirements and restrictions on expiration dates and inactivity/service fees. One state – California – was poised to significantly increase the cash-back threshold from less than $10 to $25 or less (subject to future increases due to inflation) through the enactment of SB 1272. However, in somewhat of a surprise, the California Assembly scrapped the bill after it passed the Senate, thereby taking this cash-back increase off the table for 2024. This follows the similar last-minute failure of another consumer protection bill in 2023 (SB 728), which would have prohibited all gift cards from being issued in plastic form beginning in 2028. However, the governor ultimately vetoed this bill. It remains to be seen whether additional efforts to update California’s consumer protection provisions will be made in 2025.
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Retailers and other companies that offer gift cards to consumers should carefully monitor state legislative developments to determine whether any action is required given the nature of the company’s business. We expect that states will continue to take great interest in gift cards and similar instruments from the unclaimed property, fraud, and consumer protection lenses as the prepaid industry continues to grow.
Unclaimed Property Developments
Most state unclaimed property laws include provisions applicable to gift cards, gift certificates, and other similar instruments that are redeemable only for goods and services, not cash. However, 37 states expressly exempt such instruments from escheatment or do not have a law requiring escheatment, including significant jurisdictions such as California, Illinois, Florida, Ohio, Pennsylvania, and Texas. Many states premise their exemption on the gift card or gift certificate not containing an expiration date or service/inactivity fees. On the other hand, the remaining 14 jurisdictions (including the District of Columbia) do have laws purporting to require the escheatment of a gift card or gift certificate.
The main gift card unclaimed property development in 2024 occurred in Idaho, which previously had the opposite rule regarding expiration than other states. In particular, Idaho’s unclaimed property law provided an exemption for “[g]ift certificates with an expiration date prominently displayed on their face,” thus presumably requiring the escheatment of nonexpiring gift certificates and gift cards. Idaho’s law also had a de minimis exemption for any intangible property with a value of $50 or less. However, Idaho changed its statute in 2024 (HB 471) and now has an express exemption for gift cards that do not expire or impose fees, bringing it more in line with other states. Along with this statutory change, Idaho eliminated its $50 de minimis exemption. A company that chose to incorporate in Idaho specifically to take advantage of this de minimis exemption (for example, a company that issued a specific type of instrument that may not technically be a gift card or gift certificate but generally had a value under $50) should now consider redomesticating to a different state because holders will no longer be able to rely on the prior de minimis exemption. There are a number of jurisdictions that can be considered for this purpose, depending on the instrument type in question.
Fraud Prevention Developments
Gift card scam prevention acts and guidelines are becoming more prevalent as states attempt to address gift card fraud, which is believed to be a growing concern in the industry. According to the Federal Trade Commission, gift card fraud made up $217 million of the $10.4 billion of total loss due to fraud in 2023.
Over the past two years, legislation aimed at combating gift card-related fraud has been introduced in Delaware, Iowa, Maine, Maryland, Nebraska, New Jersey, New York, Pennsylvania, Rhode Island, and West Virginia. These bills seek to tackle fraud in a variety of ways, including by requiring the retailer to post notice near point-of-sale locations and/or to train employees regarding fraud, as well as by imposing certain requirements for gift card packaging and display. The only states that have enacted such legislation are New York and Rhode Island, in 2023, and Delaware and Maryland, in 2024.
Both the New York (SB 1329) and Rhode Island (S 759) bills require displays of “conspicuous notice” at or near where gift cards are displayed or where the sale occurs, cautioning purchasers about prepaid card scams and instructing purchasers on what to do if they suspect they might be a potential victim of such a scam. Both states provide a model notice (see New York’s model notice and Rhode Island’s model notice), but only Rhode Island apparently requires the use of its model notice for the display. New York’s SB 9900, the New York Gift Certificate Scam Prevention Act, is currently pending and includes additional provisions regarding packaging and training, similar to Maryland’s enacted bill.
Delaware’s bill (HB 317) requires sellers of third-party gift cards to display conspicuous notice of potential gift card scams at or near the location where gift cards are physically displayed.
Maryland’s bill (SB 760) imposes comprehensive notice, packaging, and training requirements for gift cards. Similar to the New York and Rhode Island bills, the Maryland bill requires a conspicuous display of notice. The bill requires the Maryland Office of the Attorney General to provide a model notice, which has not yet been produced as of the date of this advisory. The bill’s provisions affecting open-loop gift cards go into effect on June 1, 2025, and its provisions affecting closed-loop gift cards go into effect on October 1, 2025, so we expect to see a model notice before June 1, 2025. SB 760 also includes packaging requirements and employee training requirements. Specifically, for gift cards sold in stores, the gift card packaging must conceal or cover, in a way that is not easily removed or replaced without signs of tampering, all numeric codes specific to gift card redemption (or, if it is more secure to partially conceal or cover the numeric codes, that is allowed as well). The packaging must also include a warning that states: “Do not sell or purchase if packaging has been broken or indicates tampering.” These requirements do not apply if the merchant chooses to secure the gift cards in a physical location accessible only to the merchant’s employees.
A number of bills are still pending in other states on this subject matter, and we expect additional states to focus on gift card-related fraud prevention measures in 2025.
Other Consumer Protection Developments
States have mostly been focused on fraud-related legislation in 2024, and there were no changes to state laws on consumer protection, including gift card cash-back requirements and restrictions on expiration dates and inactivity/service fees. One state – California – was poised to significantly increase the cash-back threshold from less than $10 to $25 or less (subject to future increases due to inflation) through the enactment of SB 1272. However, in somewhat of a surprise, the California Assembly scrapped the bill after it passed the Senate, thereby taking this cash-back increase off the table for 2024. This follows the similar last-minute failure of another consumer protection bill in 2023 (SB 728), which would have prohibited all gift cards from being issued in plastic form beginning in 2028. However, the governor ultimately vetoed this bill. It remains to be seen whether additional efforts to update California’s consumer protection provisions will be made in 2025.
***
Retailers and other companies that offer gift cards to consumers should carefully monitor state legislative developments to determine whether any action is required given the nature of the company’s business. We expect that states will continue to take great interest in gift cards and similar instruments from the unclaimed property, fraud, and consumer protection lenses as the prepaid industry continues to grow.
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If you have any questions, or would like additional information, please contact one of the attorneys on our Unclaimed Property Team.