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CFPB rules Maine, Tenn. unclaimed property laws superseded by federal law on gift cards

300px-Gift_card_assortmentThe CFPB ruled recently that unclaimed property laws in Maine and Tennessee that deem gift cards as abandoned property if not used within a certain period are preempted by federal law.

Under the Electronic Fund Transfer Act and the CFPB’s Regulation E, the CFPB is permitted to “make a preemption determination” as to whether the rules conflict with state laws pertaining to the “expiration dates of gift certificates, store gift cards or general-use prepaid cards.”

While federal law prohibits the sale of a gift card that expires sooner than five years after the date when the card was loaded, unclaimed property laws in Maine and Tennessee consider some gift cards abandoned property as early as two years from the date of purchase.

Some critics of the rules said that requirements to transfer unused funds to the state as early as two years after card issuance “imposes inconsistent requirements on card issuers,” thereby conflicting with federal law.

Others said Maine and Tennessee’s abandonment periods conflict with federal requirements on gift cards, which stipulate that an expiration date must be printed on the card, adding that the states’ requirement to transfer unused funds before a disclosed expiration date could potentially create a de facto expiration date that conflicts with the date printed on the card.

“Commenters unanimously agreed that a state law that would force consumers to retrieve their unused gift cards’ value from the state, rather than from the issuers, would be less protective than federal law,” the CFPB said.

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