| 47 | | - | SECTION 1. The legislature finds that the coronavirus disease 2019 (COVID-19) pandemic devastated the economy, workforce, businesses, and the people. In the aftermath, gift card scams have increased significantly, particularly through gift card draining, in which nefarious individuals steal gift cards from store displays, then copy card and personal identification numbers from the cards, and return the cards to shelves. After honest consumers purchase those gift cards and load them with value, the scammers then use the stolen information to drain the cards of that value. The legislature believes that it is necessary to shield consumers from these practices. The legislature also believes that the State's current gift certificate law, which also covers gift cards, needs to be updated. While the law contains several positive elements, including a prohibition on periodic gift certificate service fees, the law can also be enhanced to increase transparency and protections for consumers. Accordingly, the purpose this Act is to: (1) Establish a new gift card fraud law, under the scope of the unfair and deceptive practices law, which requires merchants and third-party gift card resellers to take certain steps to prevent gift card scams; (2) Require the conspicuous provision of information regarding terms and conditions of gift certificates, regardless of whether the cards are sold in person, electronically, or telephonically; and (3) Extend from two years to four years the minimum redemption period for paper gift certificates. SECTION 2. Chapter 481B, Hawaii Revised Statutes, is amended by adding a new part to be appropriately designated and to read as follows: "Part . GIFT CARD FRAUD §481BA Definitions. For the purposes of this part: "Closed-loop gift card" means a card, code, or device that is: (1) Issued to a consumer on a prepaid basis primarily for personal, family, or household purposes in a specified amount, regardless of whether that amount may be increased or reloaded in exchange for payment; and (2) Redeemable on presentation by a consumer at a single merchant or a group of affiliated merchants. "Gift card" means a closed-loop gift card or an open-loop gift card. "Merchant" means a person who directly or indirectly either offers or makes available to consumers any consumer goods, consumer services, consumer realty, or consumer credit. "Merchant" includes a person: (1) Who, directly or indirectly, purchases or offers to purchase any consumer goods or consumer realty from a consumer; or (2) In the business of paying off consumer debt in connection with the purchase of any consumer goods or consumer realty from a consumer. "Open-loop gift card" means a card, code, or device that is: (1) Issued to a consumer on a prepaid basis primarily for personal, family, or household purposes in a specified amount, regardless of whether that amount may be increased or reloaded in exchange for payment; (2) Payment card network branded; and (3) Either: (A) Redeemable on presentation at multiple unaffiliated merchants for goods or services within the payment card network; or (B) Usable at an automated teller machine. "Person" means an individual, corporation, business trust, statutory trust, estate, trust, partnership, association, two or more persons having a joint or common interest, or any other legal or commercial entity. "Third-party gift card reseller" means a merchant that, without authorization from or affiliation with the business entity issuing a gift card, is engaged in the business of: (1) Buying gift cards on behalf of consumers; or (2) Reselling gift cards to consumers. §481BB Merchants; sales of gift cards. (a) Except as provided in subsection (b), a merchant shall not knowingly sell a gift card to a consumer unless: (1) All gift cards for sale are locked in an enclosed display case, which may be opened only by the merchant or the merchant's employees; (2) The merchant conspicuously displays a notice in substantially the same form as the model notice created pursuant to paragraph (1) of section 481B-D: (A) For an in-person sale, at or near the physical location where: (i) The gift card is displayed for sale; or (ii) The sale occurs; or (B) For an online sale, on the webpage: (i) In which the gift card is offered for sale; or (ii) That is displayed before the sale is finalized; (3) For an in-person sale of an open-loop gift card, the gift card is enclosed in secure packaging that: (A) Is sealed in a manner that is not easily opened without producing signs of tampering; (B) Except as provided subparagraph (C), conceals all numeric codes specific to the activation or redemption of the gift card, including any bar code, card verification value number, personal identification number, or activation code; (C) Displays 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; and (D) Includes a warning that states the following or uses language substantially similar to the following: "Do not sell or purchase if packaging has been broken or indicates tampering"; and (4) For an in-person sale of a closed-loop gift card, the gift card is presented in packaging that: (A) Is not easily removed or replaced without signs of tampering and: (i) Fully conceals or covers all numeric codes specific to the redemption of the gift card; or (ii) Partially conceals or covers all numeric codes specific to redemption of the gift card; provided that the partial concealment or covering is more secure than full concealment of covering; and (B) Includes a warning that states the following or uses language substantially similar to the following: "Do not sell or purchase if packaging has been broken or indicates tampering". (b) A merchant may sell a gift card that is not enclosed in secure packaging as otherwise required under subsection (a)(2) if: (1) The gift card is a chip-enabled, numberless card that is activated by a consumer after registering the card on the card issuer's website; or (2) The gift card is sold exclusively by: (A) A merchant for use only at the retail establishment of the merchant; (B) A group of affiliated merchants for use only at the retail establishments of the affiliated merchants; and (C) Is secured in a physical location within the merchant's retail establishment that is accessible only by an employee of the merchant. §481BC Merchants; employee training. A merchant that displays a gift card for sale at a retail establishment shall provide training to all employees of the merchant whose duties regularly include the sale of gift cards to consumers. The training, at minimum, shall instruct employees how to identify and respond to gift card fraud in accordance with the guidelines established pursuant to paragraph (2) of section 481B-D. §481BD Model notice; guidelines. The office of consumer protection shall: (1) Create a model notice regarding gift cards for use by merchants that: (A) Cautions a consumer about gift card scams; (B) Instructs a consumer on what to do if the consumer suspects the consumer may be a victim of a gift card scam; and (C) Indicates that a gift card may not be used to pay debt; (2) Issue guidelines regarding the detection and prevention of gift card fraud that include: (A) Information that raises public awareness about gift card fraud; (B) Information about how common gift card fraud schemes work; and (C) Best practices for a merchant to prevent gift card fraud; and (3) Make available online and periodically update the model notice and guidelines required under this section. §481BE Third-party gift card resellers; information. (a) Subject to subsection (b), when a third-party gift card reseller buys or sells a gift card as part of a transaction occurring in the State, the third-party gift card reseller shall record and for at least three years maintain a copy of the following information, as applicable: (1) The date of the transaction; (2) The name of the person who conducted the transaction; (3) The name, age, and address of the seller of the gift card; (4) The seller's and consumer's driver's license number or identification card number; (5) A description of the purchased gift card, including: (A) The retailer for which the gift card is intended for use; and (B) The gift card number; (6) The specific amount issued on the gift card; (7) The prices paid to conduct the transaction; and (8) The signature of the consumer. (b) The information recorded and maintained under subsection (a) shall chronologically be written in ink or logged into a secure database, software system, or other similar technology platform. Recorded information may not be destroyed, altered, or erased; provided that a handwritten correction may be made to an entry of information by drawing a line of ink through the entry in a manner that retains legibility. (c) Information recorded under this section shall be open to inspection by any duly authorized law enforcement officer: (1) During the ordinary business hours of the third-party gift card reseller; or (2) At any other reasonable time. (d) A third-party gift card reseller, including an agent or employee of the third-party gift card reseller, shall not: (1) Fail to make an entry of or falsify, destroy, or remove any information required to be recorded and maintained under this section; (2) Refuse to allow any duly authorized law enforcement officer to inspect a record of information or gift cards in the third-party gift card reseller's possession during the ordinary business hours of the reseller or at any reasonable time; or (3) Fail to maintain a record of each gift card transaction for at least three years. (e) On the filing of an official report to a law enforcement agency by any person alleging to be a victim of theft of one or more gift cards with an aggregate value exceeding $500, the law enforcement agency may request that the issuer of the gift cards or the issuer's agents preserve and provide to the law enforcement agency all relevant evidence reasonably foreseeable to be of assistance to future criminal actions in accordance with state law." SECTION 3. Section 481B-13, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows: "(b) [The] Information regarding the date of issuance, any applicable fees, and the expiration date shall be clearly and conspicuously identified on the face of the gift certificate[,] or[, if an electronic card with a banked dollar value, clearly printed upon a sales receipt transferred to the purchaser of the electronic card upon the completed transaction.] its packaging; provided that if the gift certificate is sold or issued electronically, the seller or issuer shall include a conspicuous written statement of the foregoing information in the electronic message; provided further that if the gift card is sold or issued by telephonic means, the seller or issuer shall state the foregoing information to the purchaser before the sale. Terms and conditions of the gift certificate shall not be changed after the date of purchase or issuance, unless the change benefits the consumer. The expiration date shall be not less than five years after the date of issuance; provided that the expiration date of certificates issued only in paper form shall be not less than [two] four years after the date of issuance. If the gift certificate does not have an expiration date, it shall be valid in perpetuity." SECTION 4. In codifying the new sections added by section 2 of this Act, the revisor of statutes shall substitute appropriate section numbers for the letters used in designating the new sections in this Act. SECTION 5. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date. SECTION 6. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored. SECTION 7. This Act shall take effect on July 1, 2050. |
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| 47 | + | SECTION 1. The legislature finds that the coronavirus disease (COVID-19) pandemic devastated the economy, workforce, businesses, and the people. In the aftermath, gift card scams have increased significantly, particularly through gift card draining, in which nefarious individuals steal gift cards from store displays, then copy card and personal identification numbers from the cards, and return the cards to shelves. After honest consumers purchase those gift cards and load them with value, the scammers then use the stolen information to drain the cards of that value. The legislature believes that it is necessary to shield consumers from these practices. The legislature also believes that the State's current gift certificate law, which also covers gift cards, needs to be updated. While the law contains several positive elements, including a prohibition on periodic gift certificate service fees, the law can also be enhanced to increase transparency and protections for consumers. Accordingly, the purpose this Act is to: (1) Establish a new gift card fraud law, under the scope of unfair and deceptive practices law, which requires merchants and third-party gift card resellers to take certain steps to prevent gift card scams; (2) Requires the conspicuous provision of information regarding terms and conditions of gift certificates, regardless of whether the cards are sold in person, electronically, or telephonically; and (3) Extends from two years to four years the minimum redemption period for paper gift certificates. SECTION 2. Chapter 481B, Hawaii Revised Statutes, is amended by adding a new part to be appropriately designated and to read as follows: "Part GIFT CARD FRAUD §481BA Definitions. For the purposes of this part, except as the context otherwise requires: "Closed-loop gift card" means a card, code, or device that is: (1) Issued to a consumer on a prepaid basis primarily for personal, family, or household purposes in a specified amount, regardless of whether that amount may be increased or reloaded in exchange for payment; and (2) Redeemable on presentation by a consumer at a single merchant or a group of affiliated merchants. "Gift card" means a closed-loop gift card or an open-loop gift card. "Merchant" means a person who directly or indirectly either offers or makes available to consumers any consumer goods, consumer services, consumer realty, or consumer credit. "Merchant" includes a person: (1) Who, directly or indirectly, purchases or offers to purchase any consumer goods or consumer realty from a consumer; or (2) In the business of paying off consumer debt in connection with the purchase of any consumer goods or consumer realty from a consumer. "Open-loop gift card" means a card, code, or device that is: (1) Issued to a consumer on a prepaid basis primarily for personal, family, or household purposes in a specified amount, regardless of whether that amount may be increased or reloaded in exchange for payment; (2) Payment card network branded; and (3) Either: (A) Redeemable on presentation at multiple unaffiliated merchants for goods or services within the payment card network; or (B) Usable at an automated teller machine. "Person" means an individual, corporation, business trust, statutory trust, estate, trust, partnership, association, two or more persons having a joint or common interest, or any other legal or commercial entity. "Third-party gift card reseller" means a merchant that, without authorization from or affiliation with the business entity issuing a gift card, is engaged in the business of: (1) Buying gift cards on behalf of consumers; or (2) Reselling gift cards to consumers. §481BB Merchants; sales of gift cards. (a) Except as provided in subsection (b), a merchant may not knowingly sell a gift card to a consumer unless: (1) All gift cards for sale are locked in an enclosed display case, which may be opened only by the merchant or the merchant's employees; (2) The merchant conspicuously displays a notice in substantially the same form as the model notice created pursuant to paragraph (1) of section 481B-D: (A) For an in-person sale, at or near the physical location where: (i) The gift card is displayed for sale; or (ii) The sale occurs; or (B) For an online sale, on the webpage: (i) In which the gift card is offered for sale; or (ii) That is displayed before the sale is finalized; (3) For an in-person sale of an open-loop gift card, the gift card is enclosed in secure packaging that: (A) Is sealed in a manner that is not easily opened without producing signs of tampering; (B) Except as provided subparagraph (C), conceals all numeric codes specific to the activation or redemption of the gift card, including any bar code, card verification value number, personal identification number, or activation code; (C) Displays 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; and (D) Includes a warning that states the following or uses language substantially similar to the following: "Do not sell or purchase if packaging has been broken or indicates tampering"; and (4) For an in-person sale of a closed-loop gift card, the gift card is presented in packaging that: (A) In a manner that is not easily removed or replaced without signs of tampering: (i) Fully conceals or covers all numeric codes specific to the redemption of the gift card; or (ii) Partially conceals or covers all numeric codes specific to redemption of the gift card; provided that the partial concealment or covering is more secure that full concealment of covering; and (B) Includes a warning that states the following or uses language substantially similar to the following: "Do not sell or purchase if packaging has been broken or indicates tampering". (b) A merchant may sell a gift card that is not enclosed in secure packaging as otherwise required under subsection (a)(2) if: (1) The gift card is a chip-enabled, numberless card that is activated by a consumer after registering the card on the card issuer's website; or (2) The gift card: (A) Is sold exclusively by: (i) A merchant for use only at the retail establishment of the merchant; (ii) A group of affiliated merchants for use only at the retail establishments of the affiliated merchants; and (iii) Is secured in a physical location within the merchant's retail establishment that is accessible only by an employee of the merchant. §481BC Merchants; employee training. A merchant that displays a gift card for sale at a retail establishment shall provide training to all employees of the merchant whose duties regularly include the sale of gift cards to consumers. The training, at minimum, shall instruct employees how to identify and respond to gift card fraud in accordance with the guidelines established pursuant to paragraph (2) of section 481B-D. §481BD Model notice; guidelines. The office of consumer protection shall: (1) Create a model notice regarding gift cards for use by merchants that: (A) Cautions a consumer about gift card scams; (B) Instructs a consumer on what to do if the consumer suspects the consumer may be a victim of a gift card scam; and (C) Indicates that a gift card may not be used to pay debt; (2) Issue guidelines regarding the detection and prevention of gift card fraud that include: (A) Information that raises public awareness about gift card fraud; (B) Information about how common gift card fraud schemes work; and (C) Best practices for a merchant to prevent gift card fraud; and (3) Make available online and periodically update the model notice and guidelines required under this section. §481BE Third-party gift card resellers; information. (a) Subject to subsection (b), when a third-party gift card reseller buys or sells a gift card as part of a transaction occurring in the State, the third-party gift card reseller shall record and for at least three years maintain a copy of the following information, as applicable: (1) The date of the transaction; (2) The name of the person who conducted the transaction; (3) The name, age, and address of the seller of the gift card; (4) The seller's and consumer's driver's license number or identification card number; (5) A description of the purchased gift card, including: (A) The retailer for which the gift card is intended for use; and (B) The gift card number; (6) The specific amount issued on the gift card; (7) The prices paid to conduct the transaction; and (8) The signature of the consumer. (b) The information recorded and maintained under subsection (a) shall chronologically be written in ink or logged into a secure database, software system, or other similar technology platform. Recorded information may not be destroyed, altered, or erased; provided that a handwritten correction may be made to an entry of information by drawing a line of ink through the entry in a manner that retains legibility. (c) Information recorded under this section shall be open to inspection by any duly authorized law enforcement officer: (1) During the ordinary business hours of the third-party gift card reseller; or (2) At any other reasonable time. (d) A third-party gift card reseller, including an agent or employee of the third-party gift card reseller, shall not: (1) Fail to make an entry of or falsify, destroy, or remove any information required to be recorded and maintained under this section; (2) Refuse to allow any duly authorized law enforcement officer to inspect a record of information or gift cards in the third-party gift card reseller's possession during the ordinary business hours of the reseller or at any reasonable time; or (3) Fail to maintain a record of each gift card transaction for at least three years. (e) On the filing of an official report to a law enforcement agency by any person alleging to be a victim of theft of one or more gift cards with an aggregate value exceeding $500, the law enforcement agency may request that the issuer of the gift cards or the issuer's agents preserve and provide to the law enforcement agency all relevant evidence reasonably foreseeable as of assistance to future criminal actions in accordance with state law." SECTION 3. Section 481B-13, Hawaii Revised Statutes, is amended to read as follows: "(b) [The] Information regarding the date of issuance, any applicable fees, and the expiration date shall be clearly and conspicuously identified on the face of the gift certificate, or[, if an electronic card with a banked dollar value, clearly printed upon a sales receipt transferred to the purchaser of the electronic card upon the completed transaction.] its packaging; provided that if the gift certificate is sold or issued electronically, the seller or issuer shall include a conspicuous written statement of the foregoing information in the electronic message; provided further that if the gift card is sold or issued by telephonic means, the seller or issuer shall state the foregoing information to the purchaser before the sale. Terms and conditions of the gift certificate shall not be changed after the date of purchase or issuance, unless the change benefits the consumer. The expiration date shall be not less than five years after the date of issuance; provided that the expiration date of certificates issued only in paper form shall be not less than [two] four years after the date of issuance. If the gift certificate does not have an expiration date, it shall be valid in perpetuity." SECTION 4. In codifying the new sections added by section 2 of this Act, the revisor of statutes shall substitute appropriate section numbers for the letters used in designating the new sections in this Act. SECTION 5. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date. SECTION 6. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored. SECTION 7. This Act shall take effect upon its approval. INTRODUCED BY: _____________________________ |
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