What Is a Dormancy Fee?
A dormancy fee, sometimes called an inactivity fee or maintenance fee, is a charge that a gift card issuer deducts from the card's balance when the card has not been used for a specified period. The fee is deducted automatically from the remaining balance, reducing the funds available on the card.
Before the CARD Act of 2009, issuers had wide latitude to charge these fees, and some cards lost their entire value to fees over time without the cardholder being aware. The CARD Act addressed this directly by setting a federal floor on when fees can begin and how often they can be charged.
Dormancy fees are distinct from purchase fees (charged when you buy the card), reload fees (charged when you add funds to a reloadable card), and replacement card fees (charged when you request a new card). Each of these fee types has its own rules under the CARD Act, though dormancy fees are the ones most commonly encountered by consumers who hold a card for an extended period without using it.
The CARD Act Rules in Detail
The Credit CARD Act of 2009 amended the Electronic Fund Transfer Act to add specific provisions for gift cards. The Federal Reserve Board implemented these provisions through amendments to Regulation E. Here are the key rules as they apply to dormancy fees.
First, no dormancy fee can be charged unless the card has been inactive for at least 12 consecutive months. Inactivity means no purchases, no reloads, no balance inquiries, and no other transactions on the account during that period. A single transaction resets the inactivity clock.
Second, only one dormancy fee per month is permitted. Even if the card has been inactive for two or three years, the issuer cannot charge multiple fees per month to recoup the "missed" fees from the earlier period.
Third, the fee amount and the conditions under which it is charged must be clearly disclosed at the time of purchase. This disclosure must appear on the card or the card packaging in a clear and conspicuous manner. If a card was sold without proper fee disclosure, the fee may not be legally collectible.
The CARD Act provisions apply to gift certificates, store gift cards, and general-purpose reloadable prepaid cards that are marketed as gift cards. Cards issued for loyalty programs, employee rewards, or promotional purposes may be exempt from some of these provisions.
Disclosure Requirements
The disclosure requirement is one of the CARD Act's most practically significant provisions for consumers. It means that before you or someone else purchases a gift card, any dormancy fees must be disclosed in a clear and conspicuous manner on the card itself or on the card packaging.
What counts as "clear and conspicuous" is defined in the implementing regulations. The disclosure must be in a font size and location that a reasonable consumer would notice. Burying fee information in fine print on the back of a thick cardboard backing does not meet this standard.
If you purchase a card and later discover a dormancy fee that was not disclosed at the time of purchase, you have grounds to dispute that fee with the issuer. If the issuer does not resolve the dispute, you can file a complaint with the Consumer Financial Protection Bureau. The CFPB has authority to enforce the CARD Act's gift card provisions against issuers.
For consumers receiving a gift card as a gift, the disclosure was made to the purchaser, not necessarily to you. Checking the card packaging or the issuer's website for fee information before storing the card for later use is a practical step that can prevent unpleasant surprises.
State-Level Protections
Several states have enacted gift card laws that provide more protection than the federal CARD Act standard. In these states, the state law applies to the extent it is more protective than federal law.
California law, under the Consumer Legal Remedies Act and related statutes, generally prohibits dormancy fees on gift cards sold to California consumers, with limited exceptions for general-purpose prepaid cards. California also prohibits expiration dates on most gift cards.
New York prohibits dormancy fees on gift certificates and gift cards issued by retailers under most circumstances. New York law also requires that gift cards remain valid indefinitely for most retail gift cards.
Massachusetts, Connecticut, and Maine have enacted laws that restrict or prohibit dormancy fees on gift cards sold in those states. Oregon, where this resource is based, has consumer protection provisions that address gift card fees and expiration dates as well.
The applicable state law can depend on where the card was purchased, where the issuer is located, and in some cases where the consumer resides. Because state laws vary and change, consulting the state attorney general's consumer protection resources for your specific state is the appropriate step for state-specific questions.
Dealing with Old or Forgotten Cards
If you have a gift card that you have not used in a year or more, the first step is to check the current balance. Even if dormancy fees have been charged, there may still be a remaining balance. Use the issuer's website or the phone number on the card to check.
If the balance has been reduced by dormancy fees, review the card's terms and conditions to determine whether the fees were properly disclosed at the time of purchase. If they were not, you have a basis for a fee dispute with the issuer.
If the card has expired but still has a balance, contact the issuer. Under federal law, the remaining balance must be accessible. The issuer should be able to provide a replacement card or another mechanism for accessing the funds. A replacement fee may apply, but it must have been disclosed at the time of original purchase.
Using an old card promptly once you find it is the simplest approach. A single transaction resets the inactivity clock and prevents further dormancy fees from accruing while you decide how to use the remaining balance.
Escheatment and Unclaimed Property Laws
Escheatment is the legal process by which unclaimed property, including gift card balances in some states, is turned over to the state government after a period of inactivity. This is governed by state unclaimed property laws, not the CARD Act.
The relationship between escheatment and gift cards is complicated. Some states require issuers to turn over unused gift card balances to the state after a specified period, typically three to five years of inactivity. Other states have exemptions for gift cards or allow issuers to retain unused balances under certain conditions.
For consumers, the important point is that if a gift card balance has been escheated to the state, the consumer can often reclaim it. Most states maintain an unclaimed property database that is searchable by name. If your name is associated with an escheated gift card balance, you can typically file a claim with the state to recover the funds. The state controller or treasurer's website for your state is the place to start that search.
The National Association of Unclaimed Property Administrators (NAUPA) maintains a portal at missingmoney.com that allows consumers to search multiple states' unclaimed property databases simultaneously, which can be a useful starting point.
Filing a Complaint About Gift Card Fees
If you believe a gift card issuer has charged fees in violation of the CARD Act, the Consumer Financial Protection Bureau (CFPB) is the primary federal agency with authority to address the issue. The CFPB accepts consumer complaints about gift card fee violations through its online portal at consumerfinance.gov/complaint.
When filing a complaint, provide as much documentation as possible: the card itself, the original packaging showing (or failing to show) fee disclosures, any receipts or balance statements, and a clear description of the fee that was charged and why you believe it was improper.
The CFPB forwards complaints to the company and works to get a response. The agency also uses complaint data to identify patterns of potential violations that may warrant enforcement action. Filing a complaint, even if your individual issue is not resolved immediately, contributes to the broader consumer protection process.
State attorneys general also have authority to enforce consumer protection laws, including gift card rules, in their states. If the violation involves a state law rather than or in addition to federal law, contacting your state attorney general's consumer protection office is another avenue.