California Law on Gift Cards and Gift Certificates

California Gift CardsPurchasing gifts for others is no easy task. Gift shoppers can spend hours, days, or even weeks brainstorming the perfect gift for someone based on their interests, hobbies, or needs often to no avail. Gift cards are the solution. All busy or anxious gift shoppers know the benefits of gift cards. They provide an effortless and convenient way to wish someone a happy holiday or congratulate them on a special occasion. On top of that, recipients are glad to receive these gifts because it allows them to buy the items they truly want. Despite the overwhelming popularity of gift cards, few California shoppers are aware of the array of laws regulating gift cards and protecting consumers. Let’s explore applicable gift card laws and trends to help you continue to be an efficient, informed, and protected consumer.

The Basic Rules

California gift card law is established by statutes. These statutes provide that:

  • Most gift cards sold by retail sellers cannot contain an expiration date or a service fee, including a fee for dormancy, or nonuse.
  • Any gift card sold after January 1, 1997 is redeemable in cash for its cash value, or subject to replacement with a new gift card at no cost to the purchaser or holder.
  • As of January 1, 2008, any gift card with a cash value of less than $10 is redeemable in cash for its cash value.
  • California laws settings these rules for gift cards cannot be waived.

What does this mean for me as a consumer?

All too often, gift card purchasers and holders use their gift card balance to purchase miscellaneous items valued below the total cash value of the gift card, leaving them with partial and essentially unusable balances. The California State Legislature recognized this as a problem for consumers who are left with small values on their gift cards and who cannot buy anything in the store. This unspent money ultimately reverts to retailers who have already been paid the total cash value of the gift card. In order to avoid this inequitable result, the state legislature amended California law to provide a right to cash value redemption that was lacking in earlier versions of the law.

Specifically, California law, Civil Code section 1749.5(b)(2), provides that any gift card with a cash value of less than $10 is redeemable in cash for its value. In other words, if one is in possession of a gift card of any value under $10, even if that value is $9.99 or $0.01, they are entitled, by law, to receive this value in cash from the issuing retailer. However, the same law section adds that if gift card holder is in possession of a gift card with a balance greater than $10, and issued after January 1, 1997, the issuing retailer is given the option either to 1) redeem the gift card in cash for its cash value, or 2) provide a replacement gift card at no cost to the purchaser or holder. This means that gift card holders are not entitled to the cash value of the gift card, but rather the issuing retailer is given the option either to grant the cash value or a replacement card.

The legal distinction between gift cards with a cash value above $10 and those with a value below $10 might seem strange to most. Courts have tried to explain this distinction. A 2009 case, Marilao v. McDonald’s Corporation, was brought by a plaintiff on behalf of himself and all other customers who received McDonald’s gift cards not redeemable for cash. Notably, the plaintiff in this case did not claim that the gift card cash value was less than $10. In rejecting the claim, the court reasoned that unlike a gift card containing a balance of less than $10, plaintiff’s gift card as not useless. He could continue to use the card to make more purchases at McDonald’s. Therefore, it is important for customers to understand the difference between gift cards with different cash balances.

A simpler point, but one that is just as important, is that gift cards generally cannot be subject to an expiration date and service fees associated with nonuse. It is not hard to imagine receiving or buying a gift card but failing to use it for months or even years. Gift card purchasers and holders can rest easy knowing this gift card will be ready for use whenever they are needed. That being said, it is important to note that in limited and specific circumstances gift cards may contain an expiration date. If this is the case, the card must contain the expiration date in capital letters in at least 10-point type on the front of the card. This way, consumers can be on notice and utilize their gift cards accordingly.

Keep these simple but essential laws in mind next time you are thinking of purchasing a gift card. Happy shopping!

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