Gift Cards- disclosing fees on advertising

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Question:

We are designing a brochure for our Gift card program. We work with a vendor on this program; the vendor receives part of the fee for a card purchased and the bank receives the remainder. We sell these cards to both customers and non-customers. A gift card does not fit the definition of an "account" under TISA. Would we have to disclose the fees on the brochure? Could we say "ask about the fees" or do we have to disclose the fee schedule? Or could we be silent on the fees? Or is this a deceptive advertising practice? I am also reviewing the contract with the vendor to see if the vendor requires us to disclose fees when advertising.

Answer:

Because gift cards currently don't fall within the purview of Reg DD, as you noted, there are no specific advertising requirements, but you are wise to be concerned about possible problems under the unfair or deceptive acts or practices law. That 'catch-all' law is a great tool for use by litigators and examiners alike when an institution does something that seems slimy but isn't actually a direct violation of any other law or reg. The OCC and OTS have both issued guidance documents that touch on gift card advertising.

OTS says "Associations issuing gift cards must comply with several federal requirements affecting consumer protections. Among them are:

OTS's Advertising rule, which prohibits thrift institutions from using any advertising or promotional material or making any representation that is inaccurate or that in any way misrepresents the services offered.
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Section 5 of the Federal Trade Commission Act, which prohibits, among other things, unfair or deceptive acts or practices in or affecting commerce."

The OCC's 2006 issuance makes these statements that relate to marketing/advertising:

National bank gift card issuers should take appropriate steps to avoid engaging in marketing or promotional practices that could mislead a reasonable consumer about the terms, conditions, or limitations of the bank gift card product they are offering. For example, issuers should not advertise a gift card as having "no expiration date" if monthly service or maintenance fees, dormancy fees, or similar charges can consume the card balance and thereby have the same practical effect as an expiration date. Similarly, if such fees may consume the card balance before the stated expiration date for the card arrives, disclosures relating to that expiration date (other than the disclosure on the front of the card) should explain that possibility. Issuers also should generally avoid describing gift card products in terms suggesting that they are similar to gift certificates or other payment instruments with which consumers may be more familiar, or as products that carry federal deposit insurance when such insurance does not apply.

First published on BankersOnline.com 5/28/07