Leawood, Kan. – November 22, 2024: Earlier this year, Maryland enacted Senate Bill 760 (Acts 2024, c. 463; codified at MD Commercial Law § 14-4901 – 14-4905) amending its Consumer Protection Act with respect to gift card fraud prevention. The open loop provisions become effective June 1, 2025, and the closed loop provisions become effective October 1, 2025. The Division of Consumer Protection of the Office of the Attorney General (the “Consumer Protection Division”) is required to issue guidance regarding the new statute. MD Commercial Law § 14-4904.
The law requires merchants to implement certain safeguards concerning the sale of gift cards to prevent against gift card fraud. Some of these requirements include: (1) displaying tampering warnings where the gift cards are offered for sale and at the point of sale; (2) providing training to all employees of the merchant on how to identify and respond to gift card fraud; and (3) requiring certain third-party gift card resellers to record and maintain a copy of certain purchase or sale information for at least 3 years. MD Commercial Law § 14-4902(a); 14-4903; and 14-4905. The new law also requires certain packaging fraud protections, but those fraud packaging protections are different for open loop and closed loop cards. Id. at § 14-4902(a)(2) – (3).
For gift card fraud the new law requires: “[t]he merchant conspicuously displays a notice in substantially the same form as the model notice created under § 14-4604(1) of this subtitle (i) [f]or in-person sale, at or near the physical location where: (1) [t]he gift card is displayed for sale; or (2) [t]he sale occurs; or (ii) [f]or an online sale, on the webpage: (1) [w]here the gift card is offered for sale; or (2) [t]hat is displayed before the sale is finalized.“ Id. at § 14-4902(a)(1).
The model notice to be issued by the Consumer Protection Division shall provide the following: (1) cautions a consumer about gift card scams; (2) instructs a consumer on what to do if the consumer suspects the consumer may be a victim of a gift card scam; and (3) indicates a gift card may not be used to pay a debt. MD Commercial Law § 14-4904(1). In addition to the model notice, the Consumer Protection Division must also issue guidelines regarding gift card fraud detection and prevention that include: “(i) information that raises public awareness about gift card fraud; (ii) information about how common gift card fraud schemes work; and (iii) best practices for a merchant to prevent gift card fraud.” Id. at § (2).
The new law also prescribes packaging requirements for both open and closed loop cards sold at a physical location. The requirements are somewhat different for the card types; however, both packaging types must contain the sentence, “Do not sell or purchase if packaging has been broken or indicates tampering.” MD Commercial Law § 14-4902(a)(2)(iv) and (3)(ii). The term packaging is not defined in the statute and is subject to interpretation, including the context of its usage based on the card types. Specifically, the open loop cards must be enclosed in secure packaging that “is sealed in a manner that is not easily opened without signs of tampering; except as provided in item (iii), conceals all numeric codes specific to the activation or redemption of the gift card, including any bar code, CVV number PIN number or activation code; or [d]isplays an activation code, bar code or other activation data only if the packing used is more secure than it otherwise would be if the data were fully concealed” Id. at (a)(2)(i) – (iii). The closed loop cards must: “(1) conceal[] or cover[], in a manner that is not easily removed or replaced without signs of tampering, all numeric codes specific to redemption of the gift card; or (2) if made more secure through partial concealment or covering than full concealment or covering under item 1 of this item, partially conceal[] or cover[], in a manner that is not easily removed or replaced without signs of tampering, all numeric codes specific to redemption of the gift card.” Id. at (a)(3).
The law gives exemptions to the packaging requirements identified above. An exemption likely geared toward open loop cards exempts gift cards that are chip enabled and activated after purchase by registering the card on the issuer’s website. Id. at (b)(1). Gift cards that are sold exclusively by the merchant for use at that merchant or a group of affiliated merchants are also exempt. Id. at (b)(2). Lastly, gift cards that are “secured in a physical location within the merchant’s retail establishment that is accessible only by an employee of the merchant,” are also exempt.
The law further requires that merchants provide certain training to the employees of the merchant regarding gift card fraud. Specifically, “a merchant that displays an open- or a closed-loop gift cards for sale at a retail establishment shall provide training to all employees of the merchant whose duties regularly include the sale of open- or a closed-loop gift to consumers on how to identify and respond to gift card fraud in accordance with the guidelines. . .” established by the Division of Consumer Protection of the Office of the Attorney General. MD Commercial Law § 14-4903.
The new law has certain provisions that are specific to third-party gift card resellers only. See, MD Commercial Law § 14-4905. A third-party reseller is defined as, “a merchant who, without authorization or affiliation with the business entity issuing an open- or closed-loop gift card is engaged in the business of: (1) buying open- or closed-loop gift cards on behalf of consumers; or (2) [r]eselling open- or closed-loop gift cards to consumers.” MD Commercial Law § 14-490. The new law requires the reseller to record and maintain for at least three (3) years a copy of certain information regarding the purchase or sale of both open and closed loop gift cards. MD Commercial Law § 14-4905(b). This information must be made available to law enforcement agencies “during the ordinary business hours of the reseller or at any reasonable time.” Id. at (d)(2). There are also specifications about how the data shall be recorded and stored. Id. at (c).
The new law provides for various definitions including: open loop gift card, closed loop gift card, and third party sellers. See, 14-4901.
Card Compliant is awaiting the guidelines from the Consumer Protection Division. We are aware that many entities have reached out to that office for further clarifications regarding certain sections or points in the new law. Card Compliant will continue to monitor the Consumer Protection Division for any applicable guidelines and guidance and will update this Card Alert once received.
To read Maryland Senate Bill 760 click here: Maryland Senate Bill 760.
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