Frequently Asked Legal Questions | What's the Law on Gift Certificates?

A:   California law now holds that it is illegal to sell a gift certificate that contains:

 

 1.  An expiration date.

2.  A service fee, including, but not limited to, a service fee for dormancy, except a dormancy fee that meets all of the following:

(a) The remaining value of the gift card is five dollars ($5) or less each time the fee is assessed.

(b) The fee does not exceed one dollar ($1) per month;

(c) There has been no activity on the gift card for 24 consecutive months, including, but not limited to, purchases, the adding of value, or balance inquiries;

(d) The holder may reload or add value to the gift card; AND

(e) A statement is printed on the gift card in at least 10-point font stating the amount of the fee, how often the fee will occur, that the fee is triggered by inactivity of the gift card, and at what point the fee will be charged;

OR:

3.  A term that makes its redemption or other use invalid in the event of a bankruptcy.

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       Further, any gift certificate is redeemable in cash for its cash value, or subject to replacement with a new gift certificate at no cost to the purchaser or holder, EXCEPT that any gift certificate with a cash value of less than ten dollars ($10) is redeemable in cash for its cash value.

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       Further, a gift certificate sold without an expiration date is valid until redeemed or replaced.

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EXCEPTIONS: The above does not apply to any of the following Gift Certificate that state the expiration date in capital letters in at least 10-point font on the front;

1. Gift certificates that given for free as an award, loyalty, or promotional program;

2. Gift certificates that are sold below face value at a volume discount to employers or nonprofit and charitable organizations for fundraising, IF the expiration date is not more than 30 days after the date of sale; OR

3. Gift certificates issued for a perishable food product.

Note: the restriction on including an expiration date does not prevent an issuer of gift certificates from including on any gift certificate, on or after January 1, 2004, a provision that entitles the purchaser to a full refund of the amount that he or she paid for that gift certificate upon the occurrence of the following circumstances:

1. The gift certificate is purchased as a gift;

2. The time in which the gift certificate may be redeemed for cash by the receiver of the gift is disclosed on the gift certificate;

3. The receiver of the gift certificate as a gift does not redeem it on time.

       Therefore, it appears that a person who gets the gift certificate as a gift may have a time period within which to redeem the card for cash, as long as the person who bought the card can still do so, and the certificate so states.

       Lastly, the gift certificate constitutes value held in trust by the issuer of the gift certificate on behalf of the beneficiary of the gift certificate, and not to the issuer, and therefore an issuer in bankruptcy shall continue to honor a gift certificate issued prior to the date of the bankruptcy filing on the grounds that the value of the gift certificate constitutes trust property of the beneficiary; however, in the event of bankruptcy, this provision does not require the issuer of a gift certificate to redeem a gift certificate for cash, replace a gift certificate that has been lost or stolen, or maintain a separate account for the funds.

     Otherwise, any gift certificate sold without an expiration date is valid until redeemed or replaced.