Leawood, Kan. – November 29, 2024: In September, the New York Senate introduced New York Bill No. S09900 (“NY S09900”) which would require: (i) merchants to securely package gift certificates, (ii) a warning about tampering fraud to be printed on the secure packaging, and (iii) third-party resellers of an open loop gift certificate to record and maintain certain information for a minimum of three years. New York Bill No. S09900, named the “New York Gift Certificate Scam Prevention Act,” would amend McKinney’s General Business Law § 396-i. This proposed bill follows the enactment of a similar gift card packaging law in the state of Maryland. If passed, it would take effect 180 days after it becomes law. NY S09900 §4.
The proposed bill applies to gift certificates, which is amended to mean “an open loop gift certificate or a closed loop gift certificate.” NY S09900 §2, Subdivision 1(a)(1). It further expands on the definition of a closed loop gift certificate to mean a card, corde or device that is: “(i) issued to a consumer on a prepaid basis primarily for personal, family, or household purposes in a specified amount, regardless of whether such amount may be increased or reloaded in exchange for payment; and (ii) redeemable on presentation by a consumer at a single merchant or a group of affiliated merchants.” NY S09900 §2, Subdivision 1(a)(3)(i) and (ii).
The proposed bill states that gift certificates sold in-person in New York would need to be, “. . . enclosed in secure packaging that: (i) is sealed in a manner that is not easily opened without signs of tampering; (ii) except as otherwise provided in subparagraph (iii) of this paragraph, conceals all numeric codes specific to the activation or the redemption of such gift certificate, including but not limited to, bar codes, CVV numbers, PIN numbers, and activation codes; and (iii) displays an activation code, bar code, or other activation date only if the packaging used is more secure than it otherwise would be if the data were fully concealed. . .” NY S09900 §3, Subdivision 4(a)(i-iii).
It further requires a written warning be provided on the secure packaging to any in-person sale of a gift certificate. The following warning, or one that is very similar, must state: “DO NOT SELL OR PURCHASE IF PACKAGING HAS BEEN BROKEN OR INDICATES TAMPERING”. NY S09900 §3, Subdivision 4(a)(iv).
There are certain exceptions to the secure packaging requirements. A gift certificate sold in-person in New York would not need secure packaging, as explained above, if it has the following characteristic(s): “(i) such certificate is a chip-enabled, numberless card that is activated by a consumer after registering such gift certificate on the issuer’s website; or (ii) such gift certificate is sold exclusively by such merchant or a group of affiliated merchants for use only at the retail establishments of such merchant or affiliated merchants and is secured in a physical location within such merchant’s retail establishment that is accessible only by an employee of such merchant.” NY S09900 §3, Subdivision 4(b).
The bill also would require merchants in the state of New York that display a gift certificate for sale, to train their employees on how to identify and respond to gift card scams, if the employees are involved with selling gift certificates to consumers in-person. NY S09900 §3, Subdivision 4(c).
With regard to open loop gift certificates, the bill would also require any third-party reseller of an open loop gift certificate to record the following information when sold in-person in the state of New York: “(1) [t]he name of the person who conducted the transaction; (2) [t]he name, age, and address of the seller of the open loop gift certificate; (3) [t]he seller’s and consumer’s driver’s license or other identification card number; (4) [a] description of the purchased open loop gift certificate including the retailer for which such open loop gift certificate is intended for use and such open loop gift certificate’s identification number; (5) [t]he specific amount issued on the open loop gift certificate; (6) [t]he prices paid to conduct the transaction; and (7) [t]he signature of the consumer.” NY S09900 §3, Subdivision 4(d)(i)(1-7). The information listed in this paragraph would need to be stored securely by the third-party gift certificate reseller for a period of at least three years. The definition of a “third-party gift certificate reseller” is, “a merchant who, without authorization from or affiliation with the business entity issuing an open loop gift certificate, is engaged in the business of buying open loop gift certificates or reselling open loop gift certificates to consumers.” NY S09900 §2, Subdivision 1(a)(5). More specific details regarding record-keeping requirements can be found here.
The bill currently sits with the New York Rules Committee. Card Compliant will continue to monitor it as it moves through the legislative process and will update this Card Alert with changes.
To read New York Bill No. S09900 click here: NY S09900
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