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Gift Card Update: 2013
Here's some legal news you can use, just in time for the Holidays!
Having a hard time deciding what to get everyone on your gift list? Wish you could just buy gift cards and let everyone decide for themselves, but you've heard about gift cards expiring or charging service fees and the gift recipient actually ending up owing money?
Well, the good news is that one of the benefits of living in California during the Holidays, besides the great weather, is that most gift cards sold here cannot expire or charge a service fee. California law also requires merchants to provide cash back to the purchaser or holder of any gift certificate with a balance less than $10. The bad news is the law, as always, has several loopholes.
The California law doesn't apply to prepaid calling cards; free awards, loyalty or promotional cards; cards sold at a volume discount for fundraising; or cards issued for food products or grocery items.
Redemption: While gift cards cannot have an expiration date, they can have a redemption date, which is a date by which the recipient of the card must use it. What is the difference, you may ask? Well, a seller that chooses to put a redemption date on a gift card must give the purchaser a full refund of the amount paid for the card if the recipient does not redeem it by the redemption date. So at least you haven't just thrown your money away if the recipient of your gift is a little slow.
Fees: Another loophole is that while gift cards cannot charge a service fee, they can charge a dormancy fee for non-use. Again, the difference? Well, a dormancy fee can only be charged if:
- the value remaining on the gift card is $5.00 or less; and
- the dormancy fee is $1.00 per month or less; and
- the card has been inactive for 24 consecutive months (for example, no purchases, "reloading," or balance inquiries); and
- the holder may reload or add value to the card.
The card must bear a statement explaining any dormancy fees, visible to the purchaser prior to purchase. So at least you know what you're buying before you buy it.
Exemptions: The biggest loophole is that if the card can be used anywhere, such as an American Express™, MasterCard™, or Visa™ gift card, it is not covered by the California law. That law only covers cards issued by specific stores.
Under the current federal law, the Credit Card Accountability Responsibility and Disclosure Act of 2009 or "Credit CARD Act," gift card expiration dates are regulated. Unlike California's law, the federal law applies to gift cards with a MasterCard™, Visa™, American Express™, or Discover™ brand logo, as well as store cards. This law provides that such cards cannot expire for at least 5 years. If a card expires with unspent money, you can request a replacement card at no charge. Dormancy fees cannot be imposed unless the card has been unused for at least 12 months (less protection than California's law). Cards with an expiration date must prominently display the date on the front of the card, any monthly fee, and how to obtain additional information on the back of the card.
For more tips for both gift card purchasers and recipients, visit the California Department of Consumer Affairs website at www.dca.ca.gov.
by Public Services Librarian Kate Fitz
Links for "Gift Cards"
California Civil Code 1749-1749.45
California Department of Consumer Affairs
Consumer Reports: Gift Card "Gotchas" (Dec. 2010)
Consumer's Union: Gift Cards 2010: New Consumer Tips for the Holiday Season (Nov. 2010)
Credit CARD Act (Pub. L. 111-24, 123 Stat. 1734 (2009))