Enacts the "New York gift certificate scam prevention act" to require certain packaging security and record-keeping requirements for gift certificates by sellers of gift certificates.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A7916
SPONSOR: Bores TITLE OF BILL:
An act to amend the general business law, in relation to enacting the
"New York gift certificate scam prevention act"
PURPOSE:
To increase consumer protection from fraud and scams by increasing the
safety of open loop and closed loop gift certificates sold in New York
SUMMARY OF PROVISIONS:
Section 1: This act shall be known as the "New York Gift Certificate
Scam Prevention Act
Section 2: Amends the General Business Law to update and expand certain
definitions related to open loop gift certificates, closed loop gift
certificates, and third-party gift certificate resellers.
Section 3: Creates a new subdivision•4 of section 396-1 of the.General
Business Law to increase the product security of gift certificates sold
at retail stores, increase training for sellers of gift certificates,
and requires additional recording requirements for third-party gift
certificate resellers.
Section 4: Effective Date.
JUSTIFICATION:
Card draining is a scheme in which thieves remove gift cards from stores
capture their numeric codes or swap them out for counterfeit cards, and
place the products back on display. When an unsuspecting customer loads
money onto a tampered or counterfeit card, criminals access it online
and steal the balance. This results in a worthless card being purchased
by consumers, and if the consumer tries to reload the card the scammers
can take that money as well. This fraudulent scheme has cost more than
$250 million annually.
The gift card scam prevention act requires retailers to be trained in
how to check if a gift card has been tampered with and requires that the
manufacturers of gift cards make their packaging safer for consumers and
more difficult to be used in these scams.
The bill also increases reporting and recording requirements on third
party gift certificate sellers. These sellers will need to keep a more
accurate and traceable record of gift card sales so that scammers can be
traced by law enforcement.
LEGISLATIVE HISTORY:
2023-24-S.9900 New Bill
FISCAL IMPLICATIONS:
None to the State.
EFFECTIVE DATE:
180 days after it shall become law
STATE OF NEW YORK
________________________________________________________________________
7916
2025-2026 Regular Sessions
IN ASSEMBLY
April 11, 2025
___________
Introduced by M. of A. BORES -- read once and referred to the Committee
on Consumer Affairs and Protection
AN ACT to amend the general business law, in relation to enacting the
"New York gift certificate scam prevention act"
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. Short title. This act shall be known and may be cited as
2 the "New York gift certificate scam prevention act".
3 § 2. Paragraph (a) of subdivision 1 of section 396-i of the general
4 business law, as amended by chapter 668 of the laws of 2021, is amended
5 to read as follows:
6 (a) For the purposes of this section, the following terms shall have
7 the following meanings:
8 (1) "gift certificate" shall mean [a certificate, electronic card, or
9 other pre-funded record that: (i) is usable at a single merchant or an
10 affiliated group of merchants that share the same name, mark, or logo,
11 or is usable at multiple, unaffiliated merchants or service providers;
12 and (ii) is issued in a specified amount; and (iii) may or may not be
13 increased in value or reloaded; and (iv) is purchased and/or loaded on a
14 prepaid basis for the future purchase or delivery of any goods or
15 services; and (v) is honored upon presentation] an open loop gift
16 certificate or a closed loop gift certificate;
17 (2) "open loop gift certificate" shall mean a gift certificate redeem-
18 able at multiple, unaffiliated merchants or service providers; [and]
19 (3) "closed loop gift certificate" shall mean a card, code, or device
20 that is:
21 (i) issued to a consumer on a prepaid basis primarily for personal,
22 family, or household purposes in a specified amount, regardless of
23 whether such amount may be increased or reloaded in exchange for
24 payment; and
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD02522-01-5
A. 7916 2
1 (ii) redeemable on presentation by a consumer at a single merchant or
2 a group of affiliated merchants.
3 (4) "promotional gift certificate" shall mean a gift certificate
4 issued for no consideration which includes on the front of the gift
5 certificate (i) a statement indicating that the card is issued for
6 promotional purposes and (ii) the expiration date for the underlying
7 funds; and
8 (5) "third-party gift certificate reseller" shall mean a merchant who,
9 without authorization from or affiliation with the business entity issu-
10 ing an open loop gift certificate, is engaged in the business of buying
11 open loop gift certificates or reselling open loop gift certificates to
12 consumers.
13 § 3. Subdivisions 4, 5, 5-a, 5-b and 6 of section 396-i of the general
14 business law are renumbered subdivisions 5, 6, 7, 8 and 9, and a new
15 subdivision 4 is added to read as follows:
16 4. (a) For an in-person sale of a gift certificate, such gift certif-
17 icate shall be enclosed in secure packaging that:
18 (i) is sealed in a manner that is not easily opened without signs of
19 tampering;
20 (ii) except as otherwise provided in subparagraph (iii) of this para-
21 graph, conceals all numeric codes specific to the activation or the
22 redemption of such gift certificate, including but not limited to, bar
23 codes, CVV numbers, PIN numbers, and activation codes;
24 (iii) displays an activation code, bar code, or other activation date
25 only if the packaging used is more secure than it otherwise would be if
26 the data were fully concealed; and
27 (iv) includes the following warning or a substantially similar warning
28 that states the following language: "DO NOT SELL OR PURCHASE IF PACKAG-
29 ING HAS BEEN BROKEN OR INDICATES TAMPERING".
30 (b) A merchant may sell a gift certificate that is not enclosed in
31 secure packaging as required under paragraph (a) of this subdivision if
32 (i) such gift certificate is a chip-enabled, numberless card that is
33 activated by a consumer after registering such gift certificate on the
34 issuer's website; or (ii) such gift certificate is sold exclusively by
35 such merchant or a group of affiliated merchants for use only at the
36 retail establishments of such merchant or affiliated merchants and is
37 secured in a physical location within such merchant's retail establish-
38 ment that is accessible only by an employee of such merchant.
39 (c) A merchant that displays a gift certificate for sale at a retail
40 establishment shall provide training to all employees of such merchant
41 whose duties regularly include the sale of open loop gift certificates
42 and/or closed loop gift certificates to consumers on how to identify and
43 respond to gift certificate scams.
44 (d) (i) Subject to the provisions of subparagraph (ii) of this para-
45 graph, when a third-party gift certificate reseller sells an open loop
46 gift certificate as part of a transaction occurring in this state, such
47 third-party gift certificate reseller shall record and maintain for a
48 minimum of three years, a copy of the following:
49 (1) The name of the person who conducted the transaction;
50 (2) The name, age, and address of the seller of the open loop gift
51 certificate;
52 (3) The seller's and consumer's driver's license or other identifica-
53 tion card number;
54 (4) A description of the purchased open loop gift certificate includ-
55 ing the retailer for which such open loop gift certificate is intended
56 for use and such open loop gift certificate's identification number;
A. 7916 3
1 (5) The specific amount issued on the open loop gift certificate;
2 (6) The prices paid to conduct the transaction; and
3 (7) The signature of the consumer.
4 (ii) (1) The information recorded and maintained under this paragraph
5 shall be recorded chronologically in ink writing or logged into a secure
6 database, software system, or other similar technology platform. Except
7 as provided in clause two of this subparagraph, recorded information
8 made in ink writing shall not be destroyed, altered, or erased within
9 the time frame such recorded information is required to be kept under
10 subparagraph (i) of this paragraph.
11 (2) A handwritten correction may be made to an entry of information by
12 drawing a line of ink through such entry in a manner that retains legi-
13 bility. Information recorded under this section shall be open to
14 inspection by any duly authorized law enforcement officer: (A) during
15 the ordinary business hours of the third-party gift certificate resell-
16 er; or (B) at any reasonable time.
17 (3) A third-party gift certificate reseller, including an agent or
18 employee of such third-party gift certificate reseller, shall not: (A)
19 fail to make an entry of or falsify, destroy, or remove any information
20 required to be recorded and maintained under this section; (B) refuse to
21 allow any duly authorized law enforcement officer to inspect a record of
22 information or open loop gift certificate in such third-party gift
23 certificate reseller's possession during the ordinary business hours of
24 such reseller or at any reasonable time; or (C) fail to maintain a
25 record of each open loop gift certificate and transaction for at least
26 three years as required under subparagraph (i) of this paragraph.
27 § 4. This act shall take effect on the one hundred eightieth day after
28 it shall have become a law.
