Payments Law Tool Kit

Venable / 24 23 / Venable • Abandoned property law provides that property may be presumed abandoned under state law if there is no activity with respect to the property for a specified abandonment period. Abandoned property law and consumer protection law are often interrelated; in particular, “consumer protection” prohibitions on expiration dates are often tied to the abandoned property issue In addition, when running sweepstakes and promotions, it is important to avoid running afoul of federal and state laws that prohibit illegal lotteries. An illegal lottery is any promotion containing the following three elements: (1) a prize or award; (2) an element of chance; and (3) the giving of something of value, known as “consideration” (e.g., a purchase or entry fee). Legally compliant promotions eliminate one of these three elements. A recurring challenge for payments companies is staying ahead of the competition by providing merchants with new and innovative payment services. On the flip side, merchants – particularly retailers – are equally interested in finding new ways to engage with consumers, establish brand loyalty, and facilitate seamless payments. In recent years, these two areas have converged through the development of retailer-specific mobile wallets and other loyalty programs aimed at driving consumer engagement and purchases. The evolution over the years of new delivery systems, starting with plastic gift cards, extending to prepaid cards, and now digital wallets, has increased the attractiveness of these programs and ensured almost limitless reach for sellers. It is key, however, for payments companies that support these activities to be aware of the underlying laws and regulations governing loyalty programs. A simple loyalty program may be structured to reward repeat visits and/or purchases. More complex programs may include promotions, like sweepstakes, auctions, or charitable programs, as a means of earning and/or spending points. Regardless of structure, many of these programs face the same legal issues, namely disclosure of applicable terms and conditions, consumer protection, privacy, and the potential application of state gift card and escheat laws. Loyalty programs are regulated under both federal and state law, and closely monitored by federal and state regulators and the consumer class action bar. Accordingly, payments companies and marketers must stay up to date on the complex web of consumer protection statutes and regulations, abandoned property laws, banking and financial laws, and privacy provisions that regulate the use of such cards. • State legislatures have been active in passing new gift card laws in recent years, and with the passage of the Federal Credit Card Act in 2009, the U.S. Congress added its own new requirements and limits regarding expiration dates, fees, and disclosures for gift cards Loyalty Programs