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Gift Card Issuers Beware: CFPB Finds Limited Preemption of Unclaimed Property Laws

May 1, 2013

Authors

Bryan Cave

Gift Card Issuers Beware: CFPB Finds Limited Preemption of Unclaimed Property Laws

May 1, 2013

by: Bryan Cave

CFPB Finds Limited Preemption; Gift Card Issuers Must Honor Cards Even After Funds Have Escheated to the State

The Consumer Financial Protection Bureau (“CFPB”) recently published a final determination regarding whether the unclaimed property laws of Maine and Tennessee relating to unredeemed gift cards (“Applicable State Law”) are inconsistent with and preempted by the gift card provisions of the  Electronic Fund Transfer Act and Regulation E (“Federal Law”).  The applicable laws of Maine and Tennessee are quite similar for the issues at hand.  In its ruling, the CFPB determined that Maine’s unclaimed property law as applied to gift cards is not inconsistent with Federal Law, and therefore no preemption was found.  However, with respect to Tennessee’s unclaimed property law, the CFPB ruled in favor of preemption but only with respect to the provision permitting issuers to choose whether to honor an unclaimed gift card after

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CFPB Seeks Comments on Preemption of State Gift Card Escheat Laws

October 1, 2012

Authors

Bryan Cave

CFPB Seeks Comments on Preemption of State Gift Card Escheat Laws

October 1, 2012

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

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Third Circuit Issues Opinion in New Jersey Abandoned Property Litigation

February 3, 2012

Authors

Bryan Cave

Third Circuit Issues Opinion in New Jersey Abandoned Property Litigation

February 3, 2012

by: Bryan Cave

The Third Circuit issued a long-awaited decision in the New Jersey Abandoned Property litigation, NJ Retail Merchants Association v. Andrew Sidamon-Eristoff. The court affirmed the District Court’s decision in this important escheat case with broad implications for members of the prepaid industry.

BACKGROUND

In 2010 New Jersey passed a new abandoned property law that, if upheld, would have been devastating for gift card and prepaid card issuers doing business in New Jersey.

  • First, the new law shortened the dormancy period for prepaid cards and gift cards from being not even subject to escheat, to requiring escheat after 2 years of inactivity (a shorter period than other states, and far shorter than the required 5 years validity under the CARD Act).
  • Second, the new law also required prepaid card issuers to retroactively escheat all funds from inactive prepaid cards sold in the last 5 years.
  • Third, the new
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