By Jeannine Aversa, AP Economics Writer

WASHINGTON (AP) — The Federal Reserve on Monday proposed new rules to protect consumers from unexpected costs or restrictions on gift cards.

More than 95% of Americans have received or purchased gift cards, the Fed said.

Under the proposed rule, consumers must have at least five years to use the gift cards before they expire. The Fed also said service or inactivity fees can be imposed only under certain conditions.

Such fees can be charged if the consumer hasn't used the card for at least a year, if the consumer is given clear disclosures about them and no more than one fee is charged a month, the Fed said.

The Fed was directed to take the action under a law Congress passed in May.

"Consumers who do not use the value of the card within a short period of time may be surprised to find that the card has expired or that dormancy or service fees have reduced the value of the card," the Fed explained. "Even where fees or terms are disclosed on or with the card, the disclosures may not be clear and conspicuous."

The public, industry groups and other interested parties can comment on the Fed's proposal, which could be revised before a final rule is adopted.

The Fed said the new provisions are slated to take effect Aug. 22.

"These rules are the right step, but it would be far better for them to take effect in time for this holiday shopping season," said Sen. Charles Schumer, D-N.Y., who championed the gift card crackdown in Congress. "We will continue to push the Fed to speed up the effective data so that we end abuses by gift card issuers as soon as possible."

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