Federal Reserve tightens rules on gift card fees

The Federal Reserve announced Tuesday more stringent rules to restrict the fees on inactive gift cards. 

The final rule limits card issuers to three conditions under which they can apply service or inactivity fees to gift cards. Fees can be charged if the consumer hasn't used the card for at least a year, if no more than one fee is charged per month and the consumer is given clear disclosures about the fees. 

The new rules, which go into effect Aug. 22, specifically require issuers to disclose the exact terms and conditions pertaining to the expiration date. The Fed is requiring that gift cards must be valid for at least five years from the date of issuance or five years after the last funds were loaded onto the card. 

"The rules protect consumers from certain unexpected costs and require that gift card terms and conditions be clearly stated," the Fed said in a release. 

The target of the rule are retail gift cards, which can be used at one merchant or several as well as network-branded gift cards, for businesses that accept the card brand are merchants.