Attorney General's Opinion
Attorney General, Richard Blumenthal
June 15, 2006
The Honorable John P. Burke
Department of Banking
260 Constitution Plaza
Hartford, CT 06103
Dear Commissioner Burke:
You have requested an opinion whether, under Conn. Gen. Stat. § 42-460(a), a Connecticut bank may sell or issue a gift card for which the agreement governing the card provides that the card’s value will not expire and that no inactivity fee is imposed, although the card itself contains an expiration date. As discussed below, even though any remaining value on the card can be recovered by seeking a refund from the bank, the proposed gift card violates § 42-460(a) because the gift card cannot be used after the expiration date.
You further request an opinion whether the application of state law to gift cards issued by a national bank is preempted by federal law. As discussed below, the requirements of state law are preempted under federal law only with regard to gift cards sold by a national bank, but not as to gift cards issued by a national bank but sold by an entity other than a national bank.
You describe the following facts, to which this opinion is strictly limited. A Connecticut bank, within the meaning of
You also indicate that a national bank is presently issuing cards with an expiration date and an inactivity fee and that the national bank takes the position that
Section 42-460(a) of the General Statutes provides that “[n]o person may sell or issue a gift certificate, as defined in section 3-56a, that is subject to an expiration date. No gift certificate or any agreement with respect to such gift certificate may contain language suggesting that an expiration date may apply to the gift certificate.”2 In addition, Conn. Gen. Stat. § 3-65c provides that “a dormancy charge or fee, abandoned property charge or fee, unclaimed property charge or fee, escheat charge or fee, inactivity charge or fee, or any similar charge, fee or penalty” may not be imposed on a gift card. Thus,
A bank chartered under state law is subject to the state law restrictions on gift cards found in §§ 42-460 and 3-65c. The statutes contain no exemption for banks, and the broad statutory language indicates that the General Assembly intended that the restrictions apply to any seller or issuer of gift cards. Cogan v. Chase Manhattan Auto Fin. Corp., 276
In this instance, an expiration date is required by Visa to be on the card, after which the gift card can no longer be used. Instead, the customer is instructed in the agreement he receives when he purchases the gift card how to request a refund check for any remaining value on the card after the expiration date.
The purpose of § 42-460(a)’s prohibition on expiration dates is to ensure that the holder of the card does not at some point lose the use of the card - for which the issuer has already been paid - merely because of the passage of time, resulting in a windfall to the card's issuer. See Bell Atlantic NYNEX Mobile, Inc. v. Commissioner of Revenue Services, 273
Federal Preemption of Gift Cards Issued by National Banks
On their face, §§ 42-460(a) and 3-65c apply to any seller or issuer of a gift card, and there is no exception for national banks. However, because nationally chartered banks are subject to federal regulation under the National Bank Act, 12 U.S.C. §§ 24(Seventh) & 484, certain state laws may be preempted in their application to national banks.
To determine whether a state law is preempted, we “start with the assumption that the historic police powers of the States [are] not to be superseded by [federal law] unless that [is] the clear and manifest purpose of Congress.” Rice v. Santa Fe Elevator Corp., 331 <st1:country-region>
Preemption may occur in one of three ways: (1) when the federal statute’s language reveals an explicit intent to preempt state law; (2) when the federal statute’s purpose and structure clearly imply that Congress intended to leave no room for state law; and (3) when federal and state law conflict, either because it would be a physical impossibility to comply with both or because state law stands as an obstacle to achievement of the federal law’s purposes. Barnett Bank v.
There is little question that national banks have the power under federal law to sell gift cards and that such activity is regulated by the federal Office of the Comptroller of the Currency. Federal law authorizes national banks to provide electronic stored value systems, such as the gift cards in question here. 12 C.F.R. § 7.5002(a)(3). It further authorizes national banks to charge its customers fees. 12 C.F.R. § 7.4002. A court presented with this question may well conclude that the application of §§ 42-460 and 3-65c to gift cards sold by a national bank is an obstacle to the full exercise of a national bank’s powers under federal law and is therefore preempted. See Smiley v. Citibank (
This is different, however, from the case in which the seller of the gift card is someone other than the national bank that issued the gift card. As the federal district court recently held, when the seller of the gift card is a person other than a national bank or its operating subsidiary, even though the gift card has been issued by a national bank, the seller may not claim federal preemption. SPGGC, Inc. v. Blumenthal, 408
We trust this answers your questions.
1 Section 36a-2(12) defines a Connecticut bank as “a bank and trust company, savings bank or savings and loan association chartered or organized under the laws of this state.”
2 Section 3-56a(5) of the General Statutes defines “gift certificate” to mean
a record evidencing a promise, made for consideration, by the seller or issuer of the record that goods or services will be provided to the owner of the record to the value shown in the record and includes, but is not limited to, a record that contains a microprocessor chip, magnetic strip or other means for the storage of information that is prefunded and for which the value is decremented upon each use, a gift card, an electronic gift card, stored-value card or certificate, a store card, or a similar record or card, but “gift certificate” does not include prepaid calling cards regulated under section 42-370 or prepaid commercial mobile radio services, as defined in 47 C.F.R. Sec. 20.3.
The Visa gift cards in question come within the meaning of this definition.
Very truly yours,