OCC 2006-34
OCC Bulletin

Subject: Gift Card Disclosures
Description: Guidance on Disclosure and Marketing Issues

Date: August 14, 2006

TO: Chief Executive Officers and Compliance Officers of
All National Banks, Department and Division Heads,
and All Examining Personnel

PURPOSE AND SCOPE

This bulletin is intended to provide guidance to national
banks on a number of disclosure and marketing issues
presented by gift cards, so that national banks that
issue gift cards do so in a manner in which both
purchasers and recipients of gift cards are fully
informed of the terms and conditions of the product.(1)

BACKGROUND

A gift card is a type of prepaid or stored value card
that is designed to be purchased by one consumer
(purchaser) and presented as a gift to a second consumer
(recipient) (2). The terms and conditions of different
gift card products can vary significantly, but gift cards
are generally divided into two main categories: retail
gift cards and bank-issued gift cards. A retail gift
card is typically offered by a major retail,
entertainment, or food service company, to be used at
establishments owned and operated by that company. A
bank-issued gift card is typically issued by a financial
institution, carries the logo of a payment card network
such as VISA, MasterCard, or American Express, and can
be used at the various locations that accept cards from
that network.(3)

A bank-issued gift card is typically a bank product, and
not merely an arrangement through which a third party
can facilitate the use of its product in a payment card
network. When a gift card is a bank product, the
consumer’s agreement is with the bank, and the gift card
and the related disclosures, the cardholder agreement,
and other documentation will specifically identify the
bank as the issuer of the card. In addition, the bank
generally will establish and impose the fees and other
terms associated with the card and control the net
proceeds of such fees; will be the party with the
financial responsibility to merchants that honor the
card; and will hold for its own account, or for the
account of the consumer, the pool of funds used to pay
merchants when consumers present gift cards to pay for
goods and services.(4)

Industry studies and media reports suggest that the gift
card market is growing rapidly, and will continue to do
so over the next several years. This rapid growth –
together with the diversity of fees and other terms and
conditions among different gift card products – shows
that it is important for national banks that offer these
products to adopt sound disclosure practices to help
ensure that consumers understand the gift card products
they are purchasing and using.

CONSUMER DISCLOSURES

Because the purchaser and the recipient of a gift card
typically are not the same person, gift cards present
unique disclosure challenges. In particular, providing
disclosures to a gift card purchaser may not be
sufficient to avoid compliance and reputation risks
related to misunderstanding by a recipient about material
costs, terms, and conditions of the gift card. In these
circumstances, the OCC expects national bank gift card
issuers to take appropriate actions to ensure that
critical information is provided in a form that is
likely to be readily available to recipients, as well as
purchasers, of gift cards. Accordingly, with respect to
gift cards that are bank products, the OCC would expect
to see the following disclosures:

* Disclosures on Gift Cards. Basic information that is
most essential to a gift card recipient’s decisions
about when and how to use the card should be provided
on the gift card itself, or on a sticker or tape
affixed to the gift card. In light of the terms and
provisions of most bank gift cards, this information
generally will include disclosures relating to the
following matters:

– The expiration date of the card (which, consistent
with existing practices for credit and debit cards,
should be presented clearly on the front of the
card);

– The amount or the existence of any monthly
maintenance, dormancy, usage, or similar fees; and

– How consumers may obtain additional information
about their cards or other customer service (for
example, by providing a toll-free number or Web
site address).

* Disclosures Accompanying Gift Cards. Other
information that is important to a gift card
recipient’s decisions and actions should be provided
in a form that is designed to be passed on with the
card to the recipient, and issuers should encourage
card purchasers to provide this information to gift
card recipients. For example, the card could be
carried in promotional packaging that contains this
material information, or inserted into a sleeve that
sets forth or is attached to these disclosures.
Depending on the terms of the gift card product, this
information may include:

– The name of the bank that issued the card;

– Any other fees that may apply to the card,
including card replacement or reissuance fees,
balance inquiry fees, foreign currency conversion
fees, and cash redemption fees, and how they will
be collected (for example, by debits to the card
balance);

– Whether and how consumers can receive a replacement
card in the event that their card is lost or
stolen, the information that consumers need to
retain in order to do so, and responsibility for
unauthorized transactions;

– Where the card can be used, including, if
applicable, suggestions for using the card at gas
stations, hotels, restaurants, or other locations
that may seek payment authorization in an amount
greater than the consumer’s actual purchase;

– The issuer’s obligation to authorize transactions
through use of the card, and examples of the
circumstances under which it may refuse to do so;

– The importance of tracking the balance remaining
on the card;(5)

– Whether, and if so, how the card may be used in
“split payment” transactions (when the card is
used in conjunction with another form of payment)
and the process for redeeming de minimis remaining
balances;

– How consumers can resolve problems and complaints
and receive balance and other information about
their cards; and

– When applicable, the issuer’s ability to revoke or
change the terms of the gift card agreement.

PRACTICES TO AVOID

National bank gift card issuers should take appropriate
steps to avoid engaging in marketing or promotional
practices that could mislead a reasonable consumer about
the terms, conditions, or limitations of the bank gift
card product they are offering. For example, issuers
should not advertise a gift card as having “no expiration
date” if monthly service or maintenance fees, dormancy
fees, or similar charges can consume the card balance
and thereby have the same practical effect as an
expiration date. Similarly, if such fees may consume
the card balance before the stated expiration date for
the card arrives, disclosures relating to that expiration
date (other than the disclosure on the front of the
card) should explain that possibility. Issuers also
should generally avoid describing gift card products in
terms suggesting that they are similar to gift
certificates or other payment instruments with which
consumers may be more familiar, or as products that
carry federal deposit insurance when such insurance does
not apply.

Questions concerning this bulletin may be directed to
the Community and Consumer Law Division at (202) 874-5750
or to the appropriate supervisory office.

 

/s/
_____________________________
Julie L. Williams
First Senior Deputy Comptroller and Chief Counsel

Notes

(1) This bulletin is limited to particular disclosure
matters relating to bank-issued gift cards. It
does not address other supervisory issues relating
to these products or to other types of “prepaid” or
“stored value” card products.
(2) In this regard, gift cards differ from payroll
cards, travel expense cards, and other types of
prepaid card products that are not designed to be
marketed as a gift from one consumer to another.
(3) As in the case of credit cards, bank-issued gift
cards may be co-branded and offered through, or
jointly with, a retailer or other company such as a
retail shopping mall, but these cards generally have
the same broad acceptability as other bank cards.
(4) In connection with the gift card, the bank would be
subject to the prohibition against unfair or
deceptive acts or practices in the Federal Trade
Commission Act, 15 USC 45(a)(1), and to all other
requirements applicable to bank products.
(5) Some gift card issuers provide a simple chart,
similar to a checking account register, for gift
card recipients to use to track their purchases and
remaining balances.