Do Arkansas gift cards have a 2-year minimum expiration, or does federal law require 5 years, and can a club just zero out unused member credit at year-end?

Plain-English summary

A golf and tennis club awarded gift cards and credited members' pro-shop accounts after competitions. Senator Kim Hammer asked whether Arkansas's two-year gift-card expiration minimum or the federal five-year minimum controlled, and whether the club could erase unused member credits each year. The Attorney General gave a conditional answer because the request did not provide enough facts to classify a particular card or credit.

For a "gift certificate," "store gift card," or "general-use prepaid card" covered by the federal CARD Act, an issuer must either set no expiration date or set one at least five years after the card is obtained and clearly state its terms. The AG concludes that this federal floor preempts Arkansas's shorter two-year minimum for covered cards. The federal rule excludes five categories: reloadable devices not marketed as gifts; loyalty, award, or promotional cards; devices not marketed to the general public; paper-only instruments; and devices redeemable solely for admission to an event or venue as described in the opinion.

If a member credit falls outside the federal definitions or within one of those five exclusions, it need not meet the federal five-year floor and could be zeroed out annually. The AG did not decide whether these club credits qualify. He also did not analyze whether a particular federally exempt credit is subject to a separate Arkansas-law rule.

What this means for you

Clubs and other issuers

Determine what the issued item is and how it is marketed and redeemed before assigning an expiration date. Calling it a "member credit" or limiting distribution to members does not answer the federal question. The opinion notes that a card available to anyone who can become a program member may still be marketed to the general public. If the federal rule covers the item, use no expiration or one meeting the five-year minimum with clearly stated terms.

Members and prize recipients

A competition prize or pro-shop account credit is not automatically a federally exempt loyalty or promotional card. The AG lists examples of those programs but does not classify the club's items. The answer turns on the federal definitions and exclusions applied to the actual credit.

Counsel reviewing program design

The opinion explains the five federal exclusions and the preemption of a weaker state minimum. It does not add a rule that a promotional credit must be unpaid or that its terms must permit annual cancellation. Review the item against the statutory categories and the federal guidance the AG quotes before reaching a conclusion.

Common questions

Is Arkansas's two-year minimum enough for a covered gift card? No. For an item covered by the federal CARD Act, the AG says the five-year federal minimum preempts Arkansas's two-year rule.

Can the club erase unused competition credits each year? Possibly. The AG says credits outside the federal definitions or within one of the five federal exclusions would not need to meet the federal floor and could be zeroed out annually. He lacked facts to determine whether this club's credits qualify.

Does distribution only to members establish the nonpublic-marketing exclusion? No. The opinion says distribution method alone is not dispositive. If a member of the general public can join a program and obtain the card, the exclusion may not apply.

Are loyalty and promotional cards one of the exclusions? Yes. The opinion gives examples including sweepstakes, sales promotions, and consumer-retention rewards. It does not decide that this club's competition prizes meet that category.

Can a state require stronger expiration protection?
Yes. The AG says the federal CARD Act supplies a floor and does not preempt consistent state laws that protect consumers more.

Background and statutory framework

15 U.S.C. § 1693l-1(c) sets the federal expiration rule for covered gift certificates, store gift cards, and general-use prepaid cards. Subsection (a)(2)(D) lists the five exclusions discussed in the opinion. Federal commentary in 12 C.F.R. pt. 1005, app. C explains details including reloadability, marketing to the public, and paper-only issuance.

A.C.A. § 4-88-703(a) sets Arkansas's two-year gift-card expiration minimum. The AG reads 15 U.S.C. § 1693q to preempt that weaker rule to the extent it conflicts with the federal five-year floor. This opinion supplies no final factual classification of the club's prizes or member credits.

Citations

• 15 U.S.C. § 1693l-1(c)
• 15 U.S.C. § 1693l-1(a)(2)(D)(ii)
• 15 U.S.C. § 1693l-1(a)(2)(D)(iii)
• 15 U.S.C. § 1693l-1(a)(2)(D)(iv)
• 15 U.S.C. § 1693l-1(a)(2)(D)(v)
• 15 U.S.C. § 1693l-1(a)(2)(D)(vi)
• 15 U.S.C. § 1693q
• A.C.A. § 4-88-703(a)

Source

• Landing page: https://arkansasag.gov/divisions/opinions-foia/attorney-general-opinions-search/

Original opinion text

Opinion No. 2023-118

April 24, 2024

The Honorable Kim Hammer
State Senator
1201 Military Road PMB 285
Benton, Arkansas 72015

Dear Senator Hammer:

I am writing in response to your request for my opinion on the legal sufficiency of a golf and tennis club’s competition prizes that include credits and gift cards.

You indicate that “an Arkansas golf and tennis members’ club has occasional outside events at their club where competitions result in gift cards earned.” But at some events, you note, a player may “win a credit to be added to their credit book in the pro shop. As the member charges items, the credit is used until it is gone. If the member does not charge for any items in the pro shop, he or she will have credit for what could be a very long time unless the club can establish an expiration date.”

You ask the following two questions:

1. It is the club’s understanding that Arkansas has a legal requirement that gift cards
   must have a minimum of a two-year expiration date. But there is some thought that
   there is a federal requirement that gift cards must have a minimum of a five-year
   expiration date and that the federal requirement supersedes the Arkansas
   requirement. Is that the case, or is the Arkansas two-year minimum the legal
   requirement for gift cards?

2. Are member credits considered legally the same as gift cards issued to outside
   individuals? If not, can a club establish a rule where a member’s unused pro shop
   credit is zeroed out each year (use it or lose it)?
   The Honorable Kim Hammer
   State Senator
   Opinion No. 2023-118
   Page 2

RESPONSE

With a few exceptions described below, gift cards or credit given that meet the federal definition for “gift certificate,” “store gift card,” or “general-use prepaid card” must either (1) have no expiration date, or (2) if it does expire, the expiration date must be at least five years after obtaining the card and be clearly stated on the card. But I lack sufficient facts to definitively conclude whether a particular gift card or credit given meets these requirements. I have, however, set forth below the legal analysis that one would apply in making that determination.

DISCUSSION

Federal law—the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009—makes it unlawful for “any person to sell or issue a gift certificate, store gift card, or general-use prepaid card that is subject to an expiration date,” unless the expiration date “is not earlier than 5 years” after the issue date and “the terms of the expiration are clearly and conspicuously stated.”1 But these federal prohibitions do not apply to gift cards, “electronic promises,” “plastic cards,” or “payment codes or devices” that meet at least one of the following five criteria.

1. Reloadable and not marketed or labeled as a gift card or gift certificate.2 Generally,
   a “card, code, or other device is ‘reloadable’ if the terms and conditions of the agreement permit funds to be added to the card, code, or other device after the initial purchase or issuance.”3 But a “card, code, or other device is not ‘reloadable’ merely because the issuer or processor is technically able to add functionality that would otherwise enable the card, code, or other device to be reloaded.”4 To be “marketed or labeled as a gift card or gift certificate,” a person or business “directly or indirectly offer[s], advertis[es], or otherwise suggest[s] the potential use of a card, code[,] or other devices, as a gift for another person.”5

1
15 U.S.C. § 1693l-1(c); see also 15 U.S.C. § 1693l-1(a)(2)(A) (defining “general-use prepaid card”); 15 U.S.C. § 1693l-1(a)(2)(B) (defining “gift certificate”); 15 U.S.C. § 1693l-1(a)(2)(C) (defining “store gift card”). 2 15 U.S.C. § 1693l-1(a)(2)(D)(ii).
3
12 C.F.R. pt. 1005, app. C, at 271 (2023).
4
Id.
5
Id.
The Honorable Kim Hammer
State Senator
Opinion No. 2023-118
Page 3

2. A loyalty, award, or promotional gift card.6 A non-exhaustive list of examples of
   loyalty, award, or promotional programs include: sweepstakes or contests “that distribute cards redeemable for or toward goods or services or other monetary value to consumers as an invitation to enter into the promotion for a chance to win a prize”;7 “[s]ales promotions operated or administered by a merchant or product manufacturer that provide coupons or discounts redeemable for or towards goods or services or other monetary value”; 8 or “[c]onsumer retention programs…that provide to consumers cards or coupons redeemable for or towards goods or services or other monetary value as a reward for purchases made or for visits to the participating merchant.”9

3. Not marketed to the general public.10 Generally, a “card, code, or other device is
   marketed to the general public if the potential use of the card, code, or other device is directly or indirectly offered, advertised, or otherwise promoted to the general public” through any advertising medium, such as television, the internet, or signage.11 But the “method of distribution itself is not dispositive in determining whether a card, code, or other device is marketed to the general public.”12 If, for example, someone from the general public can become a member of a program or a customer of a business, a card given only to members of a frequent buyer program or only to customers does not fall within this exclusion because “the general public has the ability to obtain the cards.”13

4. Issued in paper form only.14 A paper certificate or receipt falls within the exemption
   only if the paper itself is used to purchase goods or services and any bar code, code, or account number on the paper is “not issued in any form other than on paper.”15 But a “card,

6
15 U.S.C. § 1693l-1(a)(2)(D)(iii); see also 12 C.F.R. § 1005.20(a)(4); 12 C.F.R. pt. 1005, app. C, at 270 (2023) (“[I]t is sufficient for the card, code, or other devices to state on the front, for example, “Reward” or “Promotional.”). 7 12 C.F.R. pt. 1005, app. C, at 270 (2023).
8
Id.
9
Id.
10
15 U.S.C. § 1693l-1(a)(2)(D)(iv).
11
12 C.F.R. pt. 1005, app. C, at 273 (2023).
12
Id. at 273–74 (outlining some of the factors that may be considered in determining whether the exclusion applies to a particular card, code, or other device). 13 Id. at 274.
14
15 U.S.C. § 1693l-1(a)(2)(D)(v).
15
12 C.F.R. pt. 1005, app. C, at 275 (2023).
The Honorable Kim Hammer
State Senator
Opinion No. 2023-118
Page 4

code or other device is not issued solely in paper form simply because it may be reproduced or printed on paper.”16

5. Redeemable solely for admission to events or venues at a particular location or
   group of affiliated locations, which may also include services or goods obtainable.17 This exemption typically “applies to cards, codes, or other devices that are not redeemed for a specified monetary value, but rather solely for admission or entry to an event or venue and for goods and services in conjunction with that admission.”18

                                *                  *                  *
   

State laws that are consistent with the CARD Act are not preempted by the Act.19 In other words, the CARD Act provides a federal floor. State laws can provide more, but not less, protection than the CARD Act.20

The Arkansas Fair Gift Card Act of 2007 makes it unlawful for any person to “sell or issue a gift certificate, a store gift card, or a general use prepaid card that is subject to an expiration date earlier than two (2) years from the date of issuance or sale of the gift certificate, store gift card, or general use prepaid card.”21

The CARD Act’s five-year expiration date preempts Arkansas’s two-year expiration date because the latter is inconsistent with the federal law floor set by the CARD Act.22 Therefore, a gift card that the CARD Act covers and that does not fall within one of the five exempt categories, would need to either not expire, or ensure that any expiration date occurs at least five years after the card is initially acquired and that “the terms of the expiration are clearly and conspicuously stated.”

16
Id.
17
15 U.S.C. § 1693l-1(a)(2)(D)(vi).
18
Official Interpretation of 12 C.F.R. § 1005.20(b)(6), 76 Fed. Reg. 81020-01.
19
See 15 U.S.C.A § 1693q (providing that the CARD Act does “not annul, alter, or affect the laws of any State relating to…expiration dates of gift certificates, store gift cards, or general-use prepaid cards, except to the extent that those laws are inconsistent” with the CARD Act, “and then only to the extent of the inconsistency”). 20 See id. (“A State law is not inconsistent…if the protection such law affords any consumer is greater than the protection afforded” by the CARD Act.). 21 A.C.A. § 4-88-703(a); see also A.C.A. §§ 4-88-702(4)(A)–(B) (defining “general use prepaid card”), 4- 88-702(5)(A)–(B) (defining “gift certificate”), 4-88-702(7)(A)–(B) (defining “store gift card”).

See, e.g., Murphy v. Nat’l Collegiate Athletic Ass’n, 584 U.S. 453, 477–79 (2018) (noting that “state law 22

was preempted because it imposed a duty that was inconsistent—i.e., in conflict—with federal law”). The Honorable Kim Hammer State Senator Opinion No. 2023-118 Page 5

To the extent that member credits either do not meet the definition of “gift certificate,” “store gift card,” or “general-use prepaid card” under the CARD Act, or meet one of the five exceptions under the CARD Act, such credits would not need to match the federal floor and could then “zero out” annually.

Assistant Attorney General William R. Olson prepared this opinion, which I hereby approve.

Sincerely,

TIM GRIFFIN
Attorney General