Recently, a customer in my store asked me to honor a gift card that had expired several years ago. I honored it, but did I have to? In the future, can I impose an “inactivity fee” for gift cards?
The law does not distinguish between “gift certificates” and “gift cards.” In California, the general rule is that gift cards or certificates cannot contain an expiration date. There are many exceptions to that rule, however. Cards that can be used at multiple stores, like “mall cards” can have an expiration date, but it must be printed on the card.
Cards and certificates sold in or after 1998 can be exempt from the general rule if they have an expiration date printed in capital, 10-point or larger type and are either 1) free and part of an award or promotional program, 2) donated or sold below face value to a nonprofit for a fundraiser or 3) for perishable food products.
You are not required to redeem a gift certificate for cash unless the card’s value is less than $10, but you are required to either redeem the card or certificate for its cash value or replace it with a new certificate or card at no cost. Businesses should develop a policy to handle these situations.
You’re also generally not allowed to include a service or non-use fee for issuing or accepting gift cards, but again, there are many exceptions to this rule. You may charge an inactivity fee if you allow gift cards to be “reloaded,” each card clearly describes the inactivity fee policy on its face, the card hasn’t been used for 24 consecutive months, the value remaining on the card is $5 or less each time you assess the fee, and the inactivity fee is $1 per month or less.
If you’re going to impose an inactivity service fee, you may also want to set a store policy that says customers can’t purchase a new gift card with an old card to circumvent your inactivity policy.
If you’re going to sell gift cards or certificates, make sure you develop a clear, written store policy and make sure your employees apply it consistently. Customers cannot waive California gift card and certificate protections even by agreement. Keep in mind also that the law prohibits selling cards and certificates in a deceptive manner, so it doesn’t pay to try to conceal fees or restrictions.
Mary Luros is a business law attorney with Hudson & Luros LLP in Napa, and can be reached at firstname.lastname@example.org. The information provided here is not legal advice, nor does it form an attorney-client relationship with the author. The author makes no representations as to the reliability or accuracy of the above information.