The Federal Reserve has apparently finalized its new rules for gift cards, which are scheduled to take effect August 22nd, 2010. At least one Senator wants them enacted earlier.

At least one part of the rules is a little disappointing; inactivity fees are allowed after one year of no use, but only one fee can be charged, not multiple fees. Other than that, the rules specify that gift cards must be valid for at least 5 years and has stricter rules about how information about fees must be displayed to the consumer prior to purchase.

What missing from the rules? Unfortunately there is no cap on fees, no specification that cards must be replaced free of charge if they are lost or stolen, no protection if the issuer files for bankruptcy, and finally, the rules don’t apply to loyalty cards, promotional cards, or to reloadable cards not sold as gift cards.

Look for plenty of cards that try to slip through these cracks. For instance, if, say, a Visa gift card had an expiration date on it for less than 5 years, you are entitled to a new one after the expiration date on the card (because you can’t use it anymore), but how many people will actually ask for a new card?

Also, keep in mind that State laws that are stronger than the Federal gift card laws still apply. For instance, in California, you should still be able to get cash back for gift cards if the balance is less than $5, even though this isn’t specified under Federal law. The best summary of State gift card laws can be found here.

Heavy lobbying by shopping mall owners in 2007 convinced the government of Manitoba to exempt mall issued gift cards from the law they passed that prohibits expiration dates and fees on gift cards. Legislators of course are loath to advertise this fact and people are getting bitten by the disparity, expecting their mall gift cards to have no fees or expiration dates. This is strikinly similar to the complete ignorance of open-loop cards by any gift card legislation issued by US states prior to the recent gift card statutes in the Credit Card Reform Act of 2009. Who knows if it was lobbying by the card issuers that gained them their exemption or just dumb luck, but they definitely didn’t dodge the bullet at the Federal level.

In Canada’s Nova Scotia province new laws came into effect on Feb 1, 2010 that prevent gift cards from having expiration dates or inactivity fees of any kind. As a result of this, one chain of malls is crying foul and has suspended sales of their mall-endorsed Mastercard gift cards. They stated a campaign to get the laws changed. One interesting note is that the website set up for the campaign claims that 96% of all gift cards are redeemed before the 15 month window after which fees were previously charged. If true, and not just political retoric, this would seem to indicate that perhaps people are more diligent in Canada about using up their gift cards.