On January 30, 2020, Maine’s governor Janet T. Mills signed into law HP 1164/LD 1612 which affects the amounts reportable as abandoned gift cards. Over the next three years, the reportable amount will be eliminated.
Maine Gift Cards as Abandoned Property
Previously, Maine required 60% of the outstanding gift card obligation to be reported as unclaimed property once it had been abandoned for two years (see Section 2067). By 2022, that amount will be zero.
Under Public Law 553, the reportable obligation is reduced in 2020 to 40% and then again in 2021 to 20%. Finally, in 2022, no amounts will be reportable for unclaimed gift cards in Maine.
The law previously exempted gift cards sold by a single issuer if the issuer sold less than $250,000 in gift cards annually.
Sections 4 and 5 of § 2067 also prohibit expiration dates and fees on gift cards.
Maine’s Gift Card Cash Back Requirement
Maine is one of the handful of states that have a cash back requirement on small balances for gift cards.
If the gift card was originally issued in an amount greater than $5, then a consumer may request, and the merchant must, redeem the remaining balance in cash after a purchase if the balance is less than $5.
Please be aware that several enterprising plaintiffs firms have been soliciting this type of case in California and similar cash-back required jurisdictions.
Maine’s History with the CARD Act
Back in 2013, Maine’s gift card laws were the subject of a federal preemption decision by the Consumer Financial Protection Bureau.
On April 19, 2013, then Director Richard Cordray issued the “Electronic Funds Transfers; Determination of Effect on State Laws (Maine and Tennessee)” which discussed how the Electronic Fund Transfer Act, as amended by the Credit Card Accountability and Responsibility and Disclosure Act of 2009, and Regulation E interplayed with state unclaimed property laws. Collectively, this law is referred to as the CARD Act of 2009.
The CARD Act generally prohibits gift cards with expiration dates unless certain conditions are met. One such condition is that gift cards cannot expire in less than five years, if all other conditions are met.
Maine’s 2 year dormancy period for gift cards is obviously less than the CARD Act’s 5 year period.
However, since Maine required issuers to honor gift cards because it did not allow expiration dates, the CFPB said that the 2 year dormancy period was not in conflict with the 5 year provision.
The CFPB said that the “Maine Act does not interfere with consumers’ ability to use their gift cards at the point-of-sale for at least as long as they are guaranteed that right by [the CARD Act], the Bureau has determined that is has no basis for concluding that the provisions in Maine’s unclaimed property law” are preempted. The Bureau relied partly on the holder’s ability to seek reimbursement of the card’s value after honoring the card post-reporting.
This conflict will be moot once the reportable amount is eliminated in 2022.
Gift Card Planning in Maine and Elsewhere
Does your company issue gift cards or prepaid cards? Then you need to be aware of the constantly changing obligations relating to unclaimed property.
This is particularly true if you have any entity in your corporate organizational structure that is incorporated or organized in Delaware. Delaware has recently been aggressively auditing and pursuing unclaimed property liabilities relating to gift cards, as noted in the Card Compliant whistleblower lawsuit as well as recent audit activity.
Contact Kimberly DeCarrera for more information to protect your corporate gift card program.