Governor Hochul Signs Package of Legislation to Protect Credit and Gift Card Holders

Governor Kathy Hochul signed a package of legislation to protect consumers from exploitative credit and gift card practices in New York. Legislation S.133-B/A.5698-B protects credit card holders by creating a grace period for the use of reward points after the closing of an account. Legislation S.3467-B/A.4629-C prohibits fees and expiration dates on gift cards and gift certificates.

“As we enter the holiday season of giving and New Yorkers buy gifts for their friends and family, it’s more important than ever that we protect them from unfair practices that have a real impact on consumers’ bottom line,” Governor Hochul said. “This legislation will guarantee a season of good cheer in New York State by making sure that no New Yorker unfairly loses their accumulated credit card rewards or is shortchanged when buying a gift card for a loved one.”

Legislation S.133-B/A.5698-B protects credit card holders by creating a grace period for the use of reward points after the closing of an account so they do not fall victim to rewards programs that are often governed by agreements that are not transparent to consumers. One particular provision in many credit card agreements allows the credit card issuer to cancel all accumulated rewards points or other rewards benefits upon the closure of the credit card account, without affording the credit card holder any opportunity to use accumulated points. This becomes a consumer protection issue when the issuer unilaterally closes an account for reasons such as a holder failing to make a payment, or for unspecified reasons that fall under catch-all clauses such as if the issuer believes the holder may be unwilling or unable to pay their debts on time.

Legislation S.3467-B/A.4629-C prohibits fees and expiration dates on gift cards and gift certificates. Many gift cards are sold with a variety of fees attached that can significantly reduce their value. These include fees paid at the time of purchase and dormancy fees for failing to use a gift card for a certain period of time. The Federal Credit CARD Act of 2009 placed some restrictions on gift card fees by prohibiting dormancy fees unless a gift card is dormant for at least twelve months and by limiting the frequency of periodic fees to no more than once a month. The CARD Act also prohibits expiration dates prior to five years after issuance. However, permitted fees on gift cards can still be substantial. This bill protects consumers by prohibiting all fees on gift cards and prohibiting gift cards that decline in value over time. In addition, to further eliminate loss of value to consumers, this bill prohibits expiration dates on gift cards and gift certificates that occur earlier than nine years from the date of issuance and allows for redemption when the remaining balance is less than five dollars.

State Senator Shelley B. Mayer said, “The sudden and unexpected cancellation of credit card rewards points is devastating, especially for those who save them over long periods of time. Similarly, gift card policies that prey on consumers by making funds difficult to access are wrong. Consumers deserve transparency from the companies they trust with their hard-earned money. I am pleased two of my bills, S133-B and S3467-B, will soon protect New Yorkers from unfair behavior of credit card companies and gift card issuers. Thank you to Assembly sponsors Assemblywoman Nily Rozic and Assemblyman Nader Sayegh, and thank you to Governor Kathy Hochul for signing these important consumer protections into law.”

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