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

Senator Hammer's question came from a golf and tennis club. The club gives gift cards as competition prizes and also issues "credits" to members through their pro shop accounts. Arkansas law says gift cards have to last at least two years; federal law (the CARD Act of 2009) says five years for covered cards. The club wanted to know which one applies, and whether unused member credits can simply be zeroed out at year-end.

The AG answered:

1. The federal five-year minimum preempts Arkansas's two-year minimum for any card that meets the federal definition of "gift certificate," "store gift card," or "general-use prepaid card." A covered card has to either have no expiration or have an expiration at least five years out, with the terms clearly and conspicuously stated.

2. Five categories of cards are exempt from the federal rule. Cards in any of these categories can have shorter expirations or no protection at all, including a "use it or lose it" annual zero-out:
   - Reloadable cards that are not marketed or labeled as gift cards
   - Loyalty, award, or promotional cards
   - Cards not marketed to the general public
   - Cards issued in paper form only
   - Cards redeemable solely for admission to events or venues at a particular location

3. Whether the club's "member credits" fall into one of these categories is fact-specific. If they are loyalty/promotional credits or are not marketed to the general public, the federal rule may not apply, and an annual zero-out would be permissible. The AG declined to make the specific determination because that requires facts not in the request.

The state law that gets preempted here is the Arkansas Fair Gift Card Act of 2007 (A.C.A. § 4-88-703(a)), which makes it unlawful 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."

What this means for you

Retailers and businesses issuing gift cards in Arkansas

If you sell gift cards to the general public that are not loyalty/promotional and not paper-only, you have to honor the federal five-year minimum. The Arkansas two-year rule does not save you from federal preemption. Print the expiration prominently on the card, and make sure terms are "clearly and conspicuously stated." A non-compliant card creates Truth-In-Lending Act exposure.

Clubs, frequent-buyer programs, and member-only credit programs

If your "credits" or "rewards" are issued only to members who have signed up, the question is whether the program is "marketed to the general public." If anyone from the public can become a member, the program likely is "marketed to the general public" because the public has the ability to obtain the cards (per the CFPB's official commentary). If membership has substantive barriers (juried admission, professional credentials), you have a stronger case that you fall outside the federal rule.

For loyalty/promotional credits earned through play, purchases, or visits (not paid for in cash), you fall into the loyalty exemption. These can be zeroed out annually if your terms say so.

Consumers receiving gift cards

For most retail gift cards bought at stores or online, the federal five-year minimum applies, and the expiration must be on the card. If you have an old gift card that says it expired two years from issuance, that expiration may be unenforceable for a card covered by the CARD Act issued after the federal rule took effect. The Consumer Financial Protection Bureau handles complaints. The Arkansas AG also enforces state consumer protection law.

For loyalty rewards, frequent-buyer points, or competition prizes from member clubs, the rules are different. The five-year floor may not apply, and the issuer can set whatever terms it wants. Read the program terms.

Consumer protection attorneys

Murphy v. NCAA, 584 U.S. 453 (2018), is the AG's preemption authority. The CARD Act expressly preempts inconsistent state law to the extent of the inconsistency (15 U.S.C. § 1693q). A state-law rule that is more protective than the CARD Act is preserved; a less protective rule is preempted. Arkansas's two-year minimum is less protective than the federal five-year minimum, so it loses to that extent.

The CFPB's official commentary in 12 C.F.R. pt. 1005, app. C, controls the close cases on what is "reloadable," what is "marketed as a gift card," what is "marketed to the general public," and what is "issued solely in paper form."

Common questions

What is the difference between "gift certificate," "store gift card," and "general-use prepaid card"?
The CARD Act and Regulation E define them slightly differently:
- "Gift certificate" is a card or other device that is issued in a specified amount, can be increased only by exchange for cash or another good or service, is purchased on a prepaid basis, and is honored by a single merchant or affiliated group.
- "Store gift card" is similar but typically reloadable in some way.
- "General-use prepaid card" is honored on multiple merchants or networks (think Visa or Mastercard prepaid).

All three are covered by the federal five-year minimum. The Arkansas Fair Gift Card Act of 2007 uses parallel definitions in A.C.A. § 4-88-702.

Are paper certificates exempt?
Yes, paper-only certificates are exempt from the federal rule (15 U.S.C. § 1693l-1(a)(2)(D)(v)). The CFPB commentary clarifies that the certificate is paper-only if the bar code, code, or account number is not also issued in some other form. A certificate that can be reproduced or printed on paper but exists in another medium is not exempt.

What about reloadable cards that are not gift cards?
Reloadable cards that are not marketed or labeled as gift cards or gift certificates are exempt (15 U.S.C. § 1693l-1(a)(2)(D)(ii)). The CFPB's commentary defines "reloadable" as having terms that permit funds to be added after initial purchase. If the technical capacity exists but the terms do not allow it, the card is not "reloadable" for this purpose.

What is a "loyalty, award, or promotional gift card"?
A non-exhaustive list per the CFPB commentary: sweepstakes/contests, sales promotions with coupons or discounts, and consumer retention programs that reward purchases or visits. Cards earned (not purchased) in these programs typically qualify. The CFPB suggests labeling them "Reward" or "Promotional" on the front to make the exemption clear.

Can the club zero out competition-prize "credits" that members earn?
If the credits qualify as a loyalty/award/promotional program (likely, given they are earned in club competitions), they fall into the federal exemption. Then the question is whether Arkansas state law adds anything. The Arkansas Fair Gift Card Act tracks the federal definitions, so if the credit is exempt federally, it is likely exempt under state law too. You can set an annual zero-out if your program rules so provide.

Can a state pass a stronger gift card protection?
Yes. 15 U.S.C. § 1693q says state law is not preempted to the extent it is more protective than the CARD Act. A state that required no expiration ever, or required cardholders to be reimbursed in cash, would not be preempted. Arkansas's two-year minimum is less protective than the federal five-year minimum, so it is preempted.

Does the federal rule require any minimum expiration?
No. The federal rule says either no expiration or at least five years. An issuer that prefers no expiration is fully compliant.

Background and statutory framework

The federal CARD Act. 15 U.S.C. § 1693l-1(c) makes it unlawful to sell or issue a gift certificate, store gift card, or general-use prepaid card subject to an expiration date earlier than five years after issuance, with terms clearly and conspicuously stated. The covered categories are defined in subsections (a)(2)(A)-(C).

The five federal exemptions. 15 U.S.C. § 1693l-1(a)(2)(D) lists exempt categories:
- Reloadable and not marketed/labeled as a gift card
- Loyalty, award, or promotional gift card
- Not marketed to the general public
- Issued in paper form only
- Redeemable solely for admission at a particular location or affiliated group

The CFPB's official commentary in 12 C.F.R. pt. 1005, app. C, clarifies each exemption.

Federal preemption. 15 U.S.C. § 1693q preempts state law that is inconsistent with the CARD Act, but only to the extent of the inconsistency. A state law that provides more protection than the CARD Act is not preempted.

The Arkansas Fair Gift Card Act of 2007. A.C.A. § 4-88-703(a) makes it unlawful to sell or issue a gift certificate, store gift card, or general-use prepaid card subject to an expiration earlier than two years after issuance. Section 4-88-702 sets out parallel definitions.

Preemption case law. Murphy v. National Collegiate Athletic Association, 584 U.S. 453, 477–79 (2018), confirmed that state law is preempted when it imposes a duty inconsistent with federal law. The Arkansas two-year minimum imposes a less protective rule than the CARD Act's five-year minimum, so it is inconsistent and preempted to that extent.

Citations

• 15 U.S.C. § 1693l-1 (CARD Act gift card provisions)
• 15 U.S.C. § 1693l-1(a)(2)(A)-(D) (definitions and exemptions)
• 15 U.S.C. § 1693l-1(c) (five-year minimum and disclosure)
• 15 U.S.C. § 1693q (preemption rule)
• 12 C.F.R. § 1005.20 (Regulation E gift card rule)
• 12 C.F.R. pt. 1005, app. C (CFPB official interpretations)
• A.C.A. § 4-88-702(4), (5), (7) (Arkansas Fair Gift Card Act definitions)
• A.C.A. § 4-88-703(a) (Arkansas two-year minimum, preempted)
• Murphy v. National Collegiate Athletic Ass'n, 584 U.S. 453 (2018) (preemption analysis)

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)?

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." 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. 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." 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." 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."

2. A loyalty, award, or promotional gift card. 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"; "[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"; 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."

3. Not marketed to the general public. 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. But the "method of distribution itself is not dispositive in determining whether a card, code, or other device is marketed to the general public." 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."

4. Issued in paper form only. 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." But a "card, code or other device is not issued solely in paper form simply because it may be reproduced or printed on paper."

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. 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."

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

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."

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. 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."

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