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| ## Co |   |                             |       |               |   |
| mptro |   |                             |       |               |   |
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| of th |   |                             |       |               |   |
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| Banks |   |                             |       |               |   |
+-------+---+-----------------------------+-------+---------------+---+
| #     |   | ## Gift Card Disclosures    | D     | ## Guid       |   |
| # Sub |   |                             | escri | ance on Discl |   |
| ject: |   |                             | ption | osure and Mar |   |
|       |   |                             |       | keting Issues |   |
+-------+---+-----------------------------+-------+---------------+---+

**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]{.underline}. 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:

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-   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]{.underline}. 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:

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```
-   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

[^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.