CA laws to protect gift cards
Every gift card comes with a long list of rules in the fine print. But do you ever wonder if there are laws regarding gift cards? Well, there are! These laws are meant to protect both the retailer and the customer.
Gift cards are a very smart tool that allow the retailer to get cash upfront without losing inventory. They also provide the consumer with the freedom and flexibility to choose how they spend their money. However, gift cards often provide an unbalanced benefit for the retailers, specifically in cases when the cards are lost or expire before the customer can use it. And so, California has created laws to even the playing field.
California Civil Code Section 1749.5 specifically addresses gift certificates and gift cards. This section deems the enforcement of an expiration date illegal. It also prohibits service fees, which previously may have occurred if the card had been dormant for some time. Now, a fee can only be applied if a card has been dormant for over 2 years, but the fee may not exceed $1 per month and the remaining value of the card is $5 or less each time the fee is assessed. This is stated in clear print on the card.
Gift cards are redeemable for their cash value or can be replaced at no cost, if issued after January 1st, 1997. Additionally, any gift card worth less than $10 is redeemable in cash for its value.
There are some exceptions to the rule prohibiting expirations. Gift cards issued as part of an awards, loyalty, or promotional program in which no money or other consideration is given in exchange for value, gift certificates donated or sold at a volume discount to employers or nonprofits for fundraising purposes, and certificates for perishable food products are all examples. The expiration date must be stated in capital letters on the front of these certificates.
One concern with unredeemed gift cards is that the firm may go bankrupt. This has happened before, leaving numerous people with gift cards that are suddenly worthless. According to California law, the value of a gift card is held in trust by the issuer, so that if the issuer goes bankrupt, the gift card value is considered the holder’s property rather than the issuer’s.
According to Civil Code Section 1749.6, a bankrupt issuer of a gift certificate must honor a gift certificate issued before the bankruptcy filing on the grounds that the value of the gift certificate is trust property of the beneficiary (holder). Gift certificates with an expiration date can be deemed worthless in certain conditions, but the money does not go to the merchant and instead escheats — that is, it reverts to the state’s general budget if it is uncollected property.