Last week, the CFPB issued final determinations as to whether certain Maine and Tennessee laws relating to unclaimed gift cards are preempted by federal law on gift card expiration dates. The rulings represent the CFPB’s first preemption determinations. The Tennessee determination was requested by payment card industry representatives and the Maine determination was requested by Maine’s Office of the State Treasurer.
Under the unclaimed property laws of Maine and Tennessee, certain types of gift cards are presumed abandoned after two years. However, the Electronic Fund Transfer Act (EFTA) and Regulation E generally prohibit the sale of a gift card that expires sooner than five years after the card is issued, or five years after the date when funds were last loaded onto the card. The Dodd-Frank Act transferred authority for interpreting Reg E to the CFPB, including authority to make preemption determinations.
Maine’s Office of the State Treasurer had advised the CFPB that, properly interpreted, Maine law requires an issuer of gift cards presumed to be abandoned to continue to honor the cards indefinitely and allows the issuer to request reimbursement from the state. Because Maine law thus did not interfere with consumers’ ability to use gift cards at the point-of-sale for at least as long as they are guaranteed that right by the EFTA and Reg E, the CFPB determined that it had no basis for concluding that the Maine law was inconsistent with, and therefore preempted by, federal law.
However, the CFPB found that Tennessee law was inconsistent with the EFTA and Reg E and therefore preempted to the extent it permitted issuers to decline to honor gift cards as soon as two years after issuance. Unlike Maine law, there was no provision requiring issuers to honor abandoned gift cards after they have transferred the cards’ unused value to Tennessee.
Because the CFPB’s determination does not relieve issuers of the requirement under Tennessee law to transfer the unused value of gift cards within the state-mandated timeframe, the CFPB observed that complying with the Tennessee requirement while at the same time having to honor gift cards until the underlying funds are permitted to expire under federal law “imposes possibly burdensome obligations on gift card issuers.” It appears that an issuer who honored a card after it transferred the card’s value to the state would have to seek reimbursement from the state. The CFPB also expressed “no opinion on the constitutional due process concerns raised by certain commenters, because the Bureau’s role is solely to determine whether State law [is] inconsistent with the requirements of the EFTA and Regulation E, not to determine whether State law is constitutional.”