CFPB to make first preemption determinations

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The CFPB intends to determine whether certain provisions of Maine and Tennessee laws relating to unclaimed gift cards are preempted by federal law on gift card expiration dates. The CFPB’s rulings will represent the agency’s first preemption determinations. According to the CFPB’s “notice of intent to make preemption determination” submitted for publication in the Federal Register, 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 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 Regulation E to the CFPB, including authority to make preemption determinations. In the notice, the CFPB describes the operation of the Maine and Tennessee laws and discusses the issues the CFPB will consider in assessing whether those laws are inconsistent with or provide greater protection to consumers than federal law.

The notice also discusses the Third Circuit’s decision earlier this year in N.J. Retail Merchants Association v. Sidamon-Eristoff that rejected the gift card issuers’ argument that New Jersey’s two-year abandonment period was preempted by federal law. (New Jersey has since amended its abandoned property law to increase the period after which gift cards are presumed abandoned from two to five years.) The CFPB “notes that the court reached its conclusion in the absence of any specific guidance or determination from the [Fed] or from the Bureau.”

We are glad to see that the CFPB has invited public input on the notice, since the CFPB does not appear to be obligated to do so. Comments will be due no later than 60 days after the date the notice is published in the Federal Register. According to the notice, the CFPB will then “analyze any comments received, conduct any further analysis that may be required, and will publish a notice of final action in the Federal Register.