SpaBoom's Guide to the Credit CARD Act
On Sunday, August 22nd, the new federal gift certificate law went into effect. While you may follow federal legislation with heated interest, we have burned lots of midnight oil to learn about the new law so you can keep on running your business. This page will explain the basics of the law and the changes we have made to our system. We also created are page with a more comprehensive analysis of the new law, its exceptions and how it interacts with state law.
New Gift Certificate Expiration Terms: The new law sets a five-year minimum term for most gift certificates sold in the United States. The new law does not shorten any minimum terms required by state law. The new law only lengthens terms that were previously less than five years to the new federal minimum term. If your state had a minimum term of seven years (I'm talking about you, Mass.), or does not permit any expiration date (CA, CT, FL, ME, MN, MT, NH, RI and WA), those terms still apply to your gift certificate sales. Otherwise, your new minimum gift certificate term is five years from date of issue, with a few exceptions.
What SpaBoom is doing to help you comply: After carefully studying the new rules we have made substantial changes and enhancements to our system to help your Instant Gift Certificates comply with the new law. Below is a summary of the changes to the SpaBoom system, broken out by type of certificate. Our system will handle expirations as follows, but please note that we are not changing any expiration dates for Instant Gift Certificates sold before August 22nd.
Dollar Value Gift Certificates: If your expiration date is set to less than five years, we will automatically change it to be five years from the date of issue. If your state forbids expiration dates, or requires a term greater than the new law mandates, we will set your gift certificate term according to our current understanding of your state's gift expiration law. We are using data provided by the National Conference of State Legislatures. Here's the quick summary:
|California, Connecticut, Florida, Maine, Minnesota,
Montana, New Hampshire, Oregon, Rhode Island, Washington
|Louisiana||Greater than 5 years|
|Illinois, Kansas, Michigan, New Mexico, Ohio||5 years|
|Maryland||Greater than 4 years|
|North Dakota||Greater than 6 years|
|Arkansas, Hawaii, New Jersey, Oklahoma, Tennesee||2 years|
|South Carolina, Kentucky||1 year|
|Alabama, Alaska, Arizona, Colorado, Delaware, Georgia,
Idaho, Indiana, Iowa, Mississippi, Missouri, Nevada,
New York, North Carolina, Pennsylvania, South Dakota,
Texas, Virginia, West Virginia, Wisconsin, Wyoming,
Service Gift Certificates: Gift Certificates redeemable for a service rather than a dollar value are not regulated by the new law. Therefore we will set the expiration dates for service Instant Gift Certificates according to our understanding of your state's expiration law.
Promotional Gift Certificates
and Rewards: Gift certificates that are promotional or
issued as part of a reward or loyalty program are exempt from the new federal
expiration terms provided they meet certain requirements. Instant Gift Certificates sold at a
discount through the SpaBoom system, given to charities or as rewards are
labeled "Reward" on the face of the certificate.
- Discounted Certificates: All Instant Gift Certificates sold at a discount will give you the option to create two expiration dates; the first expiration date is the date the promotion expires. You may set that date for any time period permitted by state law. Our default is one year. Those discounted certificates will also state "Funds expire on [date]". The funds expiration date is set according to our current understanding of your state's expiration law. For example, if you sell an Instant Gift Certificate with a face value of $50 for $40, the right to redeem it for $50 could expire in 90 days but you would be required to redeem it for $40 (the purchase price) for the minimum term your state law requires.
- Free Gift Certificates: If you give an Instant Gift Certificate to a charity or organization it will be labeled "Reward" and you can set any expiration date you like for them. Be advised that some states (FL, LA and OR for example) require free gift certificates to be valid for minimum terms. The new federal law does not have any expiration requirements for such gift certificates. Our default is one year.
- Offers: These are Instant Gift Certificates issued as rewards such as Buy-One-Get-One offers, or offers for a discounted purchase or free item (e.g., email, anniversary and birthday offers). You can set any expiration term for offers subject to state law. Our default is 60 days.
Things you should do: Neither this document nor any part of our services or system constitutes legal advice or opinions. Furthermore, we have not conducted exhaustive research into the laws of every state. Please check your state laws regarding gift certificate expiration and consult your accountant or legal counsel if you are unsure about how those laws apply to your business.
If you are interested in learning more about the new gift law in glorious detail, we have two brand-new articles available. First, we've wrote a Guide for Businesses Selling Gift Cards for our clients of all varieties - spas, restaurants, retailers and all. Then, check out our blog - we have a quick explanation of the Credit Card Act and how its gift provisions applies to small businesses.