California law protects gift card users

Kim M. from Pacific Heights asks this week’s question:

Q: “I want to get my daughter a gift card for the holiday, but I have heard that they have fees and expiration dates that can result in the card losing most or all its value. What is the law regarding these gift cards?”

A: Gift cards can be good for the retailer and the receiver. The receiver can take advantage of the after-Christmas sales to get more for his or her money, and the retailers get cash upfront without reducing inventory. These cards used to be more of a benefit for retailers, but the California Legislature, in combination with certain consumer-rights groups, has enacted legislation designed to protect consumers.

California Civil Code Section 1749.5 contains the bulk of the law regarding gift certificates and gift cards. Section 1749.5 makes it illegal to sell a gift certificate that contains an expiration date. Likewise, it provides a prohibition against service fees, including any fee for dormancy (unless it has been dormant for more than 24 months, the fee is clearly stated in 10-point type on the card, the fee is no more than $1 per month and the remaining value of the card is $5 or less each time the fee is assessed).

Any gift certificate sold after Jan. 1, 1997 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, and any gift certificate with a cash value of $10 or less is redeemable in cash for its cash value.

There are certain exceptions to the no-expiration rule. Namely, gift certificates issued pursuant to an awards, loyalty or promotional program without any money or other thing being given in exchange for value, gift certificates donated or sold below face value at a volume discount to employers or nonprofits for fundraising purposes and certificates for perishable food products. Certificates of this type with must have the expiration date in capital letters printed on the front.

One issue with gift cards that are not redeemed is the company may go bankrupt. This has happened in the past, leaving countless individuals with gift cards with no value beyond that of the plastic in their hands. California law states that the value of a gift card is held in trust by the issuer such that when and if the issuer goes bankrupt, the gift card value is not considered part of the bankrupt entity’s estate but is considered the holder’s property.

Civil Code Section 1749.6 states that an issuer of a gift certificate who is bankrupt 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 (holder). Under certain limited circumstances, gift certificates with an expiration date can be rendered valueless, but the money therefore does not go to the retailer it escheats — i.e. it reverts back to the state’s general fund if it is uncollected property.

So, Kim, this is probably more than you were asking for, but there it is. Unless the certificate meets these exceptions above, it can not be subject to an expiration date and your daughter should be able to benefit from your generosity.

Christopher B. Dolan is owner of the Dolan Law Firm. Email questions to help@dolanlawfirm.com.Christopher DolanFeatures

Just Posted

Pharmacist Hank Chen is known for providing personalized service at Charlie’s Pharmacy in the Fillmore.<ins> (Kevin N. Hume/The Examiner)</ins>
Left: A Walgreens at 300 Gough St. is among San Francisco stores closing.
Walgreens closures open the door for San Francisco’s neighborhood pharmacies

‘I think you’ll see more independents start to pop up’

San Franciscans are likely to have the opportunity to vote in four different elections in 2022. (Kevin N. Hume/S.F. Examiner)
Electionpalooza: SF school board recall will kick off a flurry of local races

‘It’s going to be a lot of elections and a lot of decisions for voters to make’

Four young politicos were elected to city government on the Peninsula in 2020. From left: Redwood City Councilmember Michael Smith; South San Francisco Councilmember James Coleman; Redwood City Councilmember Lissette Espinoza-Garnica; and East Palo Alto Councilmember Antonio Lopez.<ins> (Examiner illustration/Courtesy photos)</ins>
Progressive politicians rise to power on the Peninsula. Will redistricting reverse the trend?

‘There’s this wave of young people really trying to shake things up’

The fate of San Francisco nicotine giant Juul remains to be seen, as the U.S. Food and Drug Administration is reviewing whether to allow certain flavored vape products on the market. <ins>(Jeenah Moon/New York Times)</ins>
How the vape king of teen nicotine addiction rose and fell in San Francisco

‘Hey, Juul, don’t let the door hit you on the way out’

Most Read