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Pre-paid Gift Cards

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Question: 
What are the error resolution and disclosure requirements for pre-paid gift cards? Is the financial institution required to notify its customer base of the gift cards prior to them being offered for sale?
Answer: 

In 2007, the Federal Reserve Board added payroll cards to the definition of account under Regulation E:

Section 205.2 Definitions
* * * * *
(b)(1) Account means * * *
(2) The term includes a “payroll card account” directly or indirectly established by an employer on behalf of a consumer to which electronic fund transfers of the consumer’s wages, salary, or other employee compensation are made on a recurring basis, whether the account is operated or managed by the employer, a third-party payroll processor, a depository institution or any other person. For rules governing payroll card accounts, see Section 205.18.

Other types of stored value cards are not currently covered under the error resolution rules. However, there are pending regulatory amendments that will impact gift cards regarding the disclosure of fees and restricting expiration dates.

First published on BankersOnline.com 12/14/09

First published on 12/14/2009

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