Fed proposal restricts gift card fees

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NEW YORK (CNNMoney.com) -- The Federal Reserve announced proposed rules Monday to implement the gift card provisions of the Credit Card Accountability Responsibility and Disclosure Act of 2009.

The Fed's rules would restrict fees and expiration dates for gift certificates, store gift cards and general-use prepaid cards.

Under the credit card law enacted in May, Congress directed the Fed to implement these rules.

Specifically, the Fed said the rules would prohibit issuers from charging dormancy fees on cards unless they have been inactive for at least a year. After that, issuers are limited to one fine per month.

The rules would also prevent issuers from charging fees for monthly maintenance, balance inquiry, transactions, reloading, and at the point of the sale.

The Fed's proposal also prevents cards from expiring sooner than five years after the funds are loaded and issued or sold.

The Fed will accept comments from the public for the next 30 days, after which it can revise the proposed rules. The Fed must issue finalized regulations by Feb. 22, and they will be effective by Aug. 22.

Sen. Charles Schumer, D-N.Y., who authored the gift card reforms included in the credit card act, said in a statement that the Fed's rules "are the right step, but it would be far better for them to take effect in time for this holiday shopping season. We will continue to push the Fed to speed up the effective date so that we end abuses by gift card issuers as soon as possible."

According to the National Retail Federation, more than 55% of adults said they would like to receive gift cards this holiday season, but more than 12% will not give them as presents because they are too concerned about fees and expiration dates.

American Express (AXP, Fortune 500) announced in September that it will stop deducting the monthly $2 dormancy fees that it had charged after a year of inactivity on all its "general purpose" gift cards.