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Second Circuit Partially Overturns State Law Regulating Gift Cards

NEW YORK (CN) - The Second Circuit partially struck down a Connecticut law regulating the terms and conditions of prepaid gift cards. SPGGC LLC challenged the Connecticut Gift Card Law, which prevents companies from selling prepaid gift cards that expire or charge customers an inactivity fee.

The plaintiff sells prepaid Simon Giftcards in malls in more than 30 states. The cards are accepted by any store that accepts Visa debit cards. SPGGC tried to stop the state from enforcing the regulations, saying they restrict its ability to offer gift cards on its own terms. The circuit agreed that the state law is pre-empted by the federal Commerce Clause in its prohibition of expiration dates, because expiration dates are needed to prevent fraud and allow sellers to operate on Visa's electronic-payment platform. But SPGGC failed to state a valid claim regarding the ban on inactivity fees and other charges, the court concluded. Remanded for further proceedings. See ruling in SPGGC LLC v. Blumenthal.

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