Michigan’s new gift card law a step in right direction

Here’s some welcome news just in time for the holidays. The state of Michigan has put into place new consumer-friendly laws governing the sale of certain gift cards. As of Nov. 1, stores must honor the gift cards and gift certificates they sell for at least five years from the date of purchase.

The legislation, signed into law by Gov. Jennifer Granholm, also blocks retailers from imposing inactivity, transaction, or other service fees that would decrease the face value of the cards.

Retailers are further required to disclose all gift-card terms and conditions to prospective buyers under the new rules, and companies can’t change the rules after the card has been issued.

The new five-year rule governing expiration dates applies only to cards bought since Nov. 1. If you bought a card earlier, and it becomes worthless after a year or two, you’re out of luck. It’s not retroactive.

We applaud our friends in the Michigan legislature and governor’s office. But here’s the problem, and it’s not unique to Michigan. For all the plusses, the legislation has a big hole in it. Not covered under the new provisions are gift cards issued by banks and other financial institutions, for example, American Express or Visa. These cards, which are the most likely to come with expiration dates and fees, are exempt from the rules.

That’s because the Comptroller of the Currency, a federal office under the Department of the Treasury, oversees and regulates all national banks, including those financial institutions that issue gift cards – for example, American Express and Visa.

“State law can’t trump national law,” explains Matt Frendewey, a spokesman for Michigan Attorney General Mike Cox.

Michigan is one of around 24 other states that has begun considering legislative measures to make gift cards last longer, according to the National Conference of State Legislatures. Heather Morton, an NCSL spokesperson, alerted us to a  site that explains in detail each state’s gift-card rules, and the latest legislation in the pipeline.

Thanks to commenter Fran for suggesting this topic!