A new bill in Michigan will add more regulations to gift cards. While one provision is likely to be mostly harmless, others in the bill may cause headaches for retailers and consumers.
House Bills 4193 and 4914, introduced by Rep. Abdullah Hammoud, D-Dearborn and Rep. Robert Wittenberg, D-Oak Park, would eliminate the expiration date on gift cards. They would also classify certain prepaid discount cards — those use to purchase goods, services or classes at a lower-than-normal price — as gift cards.
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The issue is the “certain prepaid cards” provision. In the text of House Bill 4193, the definition remains vague. Here is the text from the bill:
(ii) A prepaid discount card or program used to purchase identified goods, services, or classes at a price or percentage below the normal and customary price.
The problem with this language is that it could sweep up programs that are funded by companies rather than consumers.
Here is the text of the bill
The legislation is described as “consumer protection” legislation, but discount cards typically are funded by the retailers, which means the legislation does not protect consumers at all.
Federal legislation has excluded promotional cards specifically for this reason, which could put the Michigan legislation in conflict with Federal legislation. The CARD Act specifies that state laws take precedence when they are more protective of the consumer. Conflicts in the past have been sorted out by the Consumer Financial Protection Bureau, which would likely rule in this case.
If the rule were to go through as written, consumers in Michigan would probably see discounts disappear.
Overview by Ben Jackson, Director, Prepaid Advisory Service at Mercator Advisory Group
