You want to give a gift to a friend, but they “already have everything.”
You make it possible for your friend to purchase the item or product they desire by giving them a gift certificate or a gift card. Gift cards from a business you regularly patronize are also a good idea.
This legal guide aims to answer common questions about gift certificates and gift cards. Be sure to read the entire answer since most of the answers have exceptions. Additionally, the federal government recently enacted regulations on gift certificates and gift cards, effective August 22, 2010.
Federal law may preempt state law where the terms are inconsistent, and federal law is more protective of consumers. In light of the new federal regulation, specific pre-emption issues have not been decided by the Federal Reserve Board, nor have they been litigated.
These basic rules govern gift certificates and gift cards:
- The majority of gift certificates and gift cards sold by retail sellers for use with their affiliates cannot contain an expiration date or a service fee.
- A gift certificate sold after January 1, 1997, may be redeemed for cash or replaced at no cost with a new gift certificate. Since January 1, 2008, any gift certificate with a cash value of less than $10 is redeemable in cash, including currency and checks.
Is There a Difference Between a “Gift Certificate” and a “Gift Card”?
Yes. A gift card that can be used at multiple unaffiliated sellers is excluded from the terms (for example, one that can be used at all or some of the stores at a particular mall), provided that the expiration date is displayed. Prepaid calling cards issued solely to provide access numbers and authorization codes for prepaid calling services do not fall under the rules described in this legal guide.
Is it Possible for a Gift Certificate or Gift Card to Have an Expiration Date?
No. There are, however, a few exceptions to this general rule:
- Gift cards that can be used with multiple unaffiliated sellers may have an expiration date. If this is the case, the expiration date must be printed on the card.
- Gift certificates may be purchased with funds from one or more contributors to be given to another person (the “recipient”), and the recipient may be required to redeem the funds by a certain date.
- The exception is only applicable if each contributor receives a full refund of the amount paid if: the funds are contributed for the recipient to redeem as a gift certificate; the time in which the recipient may redeem the funds is clearly communicated to the contributors, and the recipient and the recipient does not redeem the funds within that time frame.
- The distinction here is that the contributor(s) do not purchase the gift card themselves. They contribute money to be held with the seller until the recipient uses the funds to purchase a gift certificate.
The rules discussed here do not apply to certain gift certificates or gift cards sold after January 1, 1998. The gift cards or certificates must have an expiration date in capital letters in at least 10-point type on the front in order to qualify for exemption:
- Presented to consumers free of charge as part of an award, loyalty, or promotional program; or
- If the expiration date is 30 days or less after the date of sale, the cards may be donated or sold below face value at a volume discount to employers or nonprofit and charitable organizations for fundraising purposes;
- Issued for perishable food products.
Is it Possible to Charge a Service Fee on a Gift Certificate or Gift Card?
No. You cannot charge a fee for dormancy (non-use) on a gift certificate or gift card.
However, there is an exception from this general rule for a gift card where:
- Each time the fee is assessed, the remaining value on the gift card is $5.00 or less;
- Dormancy fees are $1.00 or less per month;
- Inactivity for 24 consecutive months (no purchases, reloads, or balance inquiries);
- Reloading or adding value to the card is possible;
- On the card is a statement in at least 10-point type stating the amount and frequency of the fee, that the fee is triggered by inactivity, and at what point the fee will be charged. The statement may be on the front or back of the card, but it must be visible to the purchaser.
A seller of unaffiliated, multiple seller cards without an expiration date — many of which are sold by banks like prepaid debit cards — may assert that such cards are not included in the definition of “gift certificate,” so service fees or dormancy fees can be charged without disclosure.
When purchasing “unaffiliated, multiple seller” cards, buyers should be aware that not all questions about the terms of these cards have been answered and should ask carefully about them.
Is it Possible to Redeem a Gift Certificate or Gift Card for Cash?
It depends on the seller’s policy. Under the gift certificate law, a seller must either redeem a gift certificate or gift card sold after January 1, 1997, for its cash value or replace it with a new one. However, some states’ Legislative Counsel have concluded that a seller is not required to redeem a gift certificate in cash upon request from a consumer.
For example, some gift certificate sellers redeem the gift certificate for cash or a combination of merchandise and cash, whereas others issue a new certificate for any balance remaining after the original certificate is redeemed. If a gift certificate or gift card does not have an expiration date, it is valid until redeemed or replaced.
Since January 1, 2008, a gift certificate with a cash value of fewer than ten dollars ($10) can be redeemed in cash (not for a new certificate or merchandise) for its cash value. For the purposes of this section, cash includes currency and checks. The seller is responsible for giving each contributor a full refund of the amount paid toward the gift certificate if the seller accepts funds toward the certificate as a gift for another person (the “recipient”).
If the time at which the recipient may redeem the funds by purchasing a gift certificate is clearly disclosed to contributors and recipients, and if the recipient does not redeem the funds by the time disclosed, the recipient must receive a refund.
Can a Company Charge Administrative “Dormancy” Fees for Old Gift Certificates?
When a gift card remains unused after a certain period of time, companies charge administrative “dormancy” fees. There are, however, a few states that have passed laws that ban or limit dormancy fees.
Should I Contact a Consumer Protection Lawyer?
If a company refuses to honor your gift certificate or is charging dormancy fees for your old gift certificate, you may want to speak with a manager. If applicable, cite the state law prohibiting dormancy fees on gift certificates and explain your claim to the manager. If the company is uncooperative and you still want to pursue your claim, contact a lawyer.
When a gift certificate is purchased in one state and used in another, it can be challenging to determine which laws apply. An experienced consumer lawyer can explain your rights to you and help you successfully pursue your claim.