Enacts the "New York gift certificate scam prevention act" to require certain sale, 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: A7916A
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--A
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 -- committee discharged, bill
amended, ordered reprinted as amended and recommitted to said commit-
tee
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;
16 (2) "open loop gift certificate" shall mean a gift certificate redeem-
17 able at multiple, unaffiliated merchants or service providers; [and]
18 (3) "promotional gift certificate" shall mean a gift certificate
19 issued for no consideration which includes on the front of the gift
20 certificate (i) a statement indicating that the card is issued for
21 promotional purposes and (ii) the expiration date for the underlying
22 funds; and
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD02522-05-5
A. 7916--A 2
1 (4) "third-party gift certificate reseller" shall mean a merchant who,
2 without authorization from or affiliation with the business entity issu-
3 ing an open loop gift certificate, is engaged in the business of buying
4 open loop gift certificates or reselling open loop gift certificates to
5 consumers.
6 § 3. Subdivisions 4, 5, 5-a, 5-b and 6 of section 396-i of the general
7 business law are renumbered subdivisions 5, 6, 7, 8 and 9, and a new
8 subdivision 4 is added to read as follows:
9 4. (a) For an in-person sale of a gift certificate, such gift certif-
10 icate shall:
11 (i) conceal all visible numbers, such as a card number, CVV numbers,
12 or PIN numbers, that can be used for balance inquiries or manual entry
13 redemption; or
14 (ii) display such information only if the gift certificate incorpo-
15 rates technology that is designed to prevent activation if that gift
16 certificate has been subject to tampering or incorporates technology
17 that is designed to detect and prevent unauthorized redemption.
18 (b) A merchant may sell a gift certificate that does not conceal all
19 visible numbers used for balance inquiries or manual entry redemption,
20 as required under paragraph (a) of this subdivision if such gift certif-
21 icate is:
22 (i) a chip-enabled, numberless card that is activated by a consumer
23 after registering such gift certificate on the issuer's website;
24 (ii) such gift certificate is sold exclusively by such merchant or a
25 group of affiliated merchants for use only at the retail establishments
26 of such merchant or affiliated merchants and is secured in a physical
27 location within such merchant's retail establishment that is visible at
28 all times to an employee of such merchant or accessible only by an
29 employee of such merchant;
30 (iii) incorporates technology that is designed to prevent activation
31 if that gift certificate has been subjected to tampering; or
32 (iv) incorporates technology that is designed to detect and prevent
33 unauthorized redemption.
34 (c) A merchant that displays a gift certificate for sale at a retail
35 establishment shall provide training to all employees of such merchant
36 whose duties regularly include the sale of gift certificates and/or open
37 loop gift certificates to consumers on how to identify and respond to
38 gift certificate scams.
39 (d) (i) Subject to the provisions of subparagraph (ii) of this para-
40 graph, when a third-party gift certificate reseller sells an open loop
41 gift certificate as part of a transaction occurring in this state, such
42 third-party gift certificate reseller shall record and maintain for a
43 minimum of three years, a copy of the following:
44 (1) The name of the person who conducted the transaction;
45 (2) The name, age, and address of the seller of the open loop gift
46 certificate;
47 (3) The seller's and consumer's driver's license or other identifica-
48 tion card number;
49 (4) A description of the purchased open loop gift certificate includ-
50 ing the retailer for which such open loop gift certificate is intended
51 for use and such open loop gift certificate's identification number;
52 (5) The specific amount issued on the open loop gift certificate;
53 (6) The prices paid to conduct the transaction; and
54 (7) The signature of the consumer.
55 (ii) (1) The information recorded and maintained under this paragraph
56 shall be recorded chronologically in ink writing or logged into a secure
A. 7916--A 3
1 database, software system, or other similar technology platform. Except
2 as provided in clause two of this subparagraph, recorded information
3 made in ink writing shall not be destroyed, altered, or erased within
4 the time frame such recorded information is required to be kept under
5 subparagraph (i) of this paragraph.
6 (2) A handwritten correction may be made to an entry of information by
7 drawing a line of ink through such entry in a manner that retains legi-
8 bility. Information recorded under this section shall be open to
9 inspection by any duly authorized law enforcement officer: (A) during
10 the ordinary business hours of the third-party gift certificate resell-
11 er; or (B) at any reasonable time.
12 (3) A third-party gift certificate reseller, including an agent or
13 employee of such third-party gift certificate reseller, shall not: (A)
14 fail to make an entry of or falsify, destroy, or remove any information
15 required to be recorded and maintained under this section; (B) refuse to
16 allow any duly authorized law enforcement officer to inspect a record of
17 information or open loop gift certificate in such third-party gift
18 certificate reseller's possession during the ordinary business hours of
19 such reseller or at any reasonable time; or (C) fail to maintain a
20 record of each open loop gift certificate and transaction for at least
21 three years as required under subparagraph (i) of this paragraph.
22 § 4. This act shall take effect September 1, 2026.
