October 1, 2012
Authored by: Bryan Cave
The Consumer Financial Protection Bureau (CFPB) is considering requests that it make a determination on whether certain provisions of the Maine and Tennessee abandoned property laws are inconsistent with the CARD Act provisions of the Electronic Fund Transfer Act (EFTA) and Reg. E and are thus preempted.
Under the EFTA, the bureau must evaluate whether state law is inconsistent with federal law. One way for a state law to be inconsistent is by “requir[ing] or permit[ing] a practice or act prohibited by the federal law.” An inconsistent state law is preempted by federal law only to the extent of the inconsistency. State law cannot be preempted, however, if the state law provides consumers greater protection than federal law.
The gift card provisions of Reg. E prohibit expiration dates of less than five years. The abandoned property laws of Maine and Tennessee, however, generally require escheatment to the state of unused balances on certain types of gift cards after two years of card inactivity. A bank or retail gift card issuer that has escheated funds to the state may subsequently honor the card if it’s presented for payment and file a request for reimbursement with the state. However, such issuer may also elect to decline to honor the card, in which case, the consumer will have to attempt to reclaim card funds directly from the state (although it may not be obvious to the consumer which state to contact).