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December 2002

Don't Toss Out Those Old Gift Certificates!

By Stacey Olliff, Esq.

Here's a timely reminder for those who are getting or giving gift certificates this holiday season. In 1997, California enacted a law at Civil Code Section 1749.5 that gift certificates cannot have an expiration date. Most retailers are aware of this, but some still fail to comply since expiration dates are permitted in most other states (only four other states, New Hampshire, Hawaii, Massachusetts, and Rhode Island, have laws restricting gift certificate expiration dates, and those laws are milder).

There are exceptions in the California law for gift certificates that are given away as part of a promotional program or sold below face value. But the law covers the typical situation where someone buys a gift certificate (or these days, often an electronic gift card) for the face value to give as a gift, so the recipient can use the certificate or card to pick out his or her own present at the retailer. In that situation, the merchant is getting free use of the money before the card is used, but California does not allow the merchant to impose an expiration date, since that would effectively give the merchant a windfall and cause an unfair forfeiture to the other parties involved.

So if you are cleaning out your sock drawer and run across an old gift certificate or gift card that you received a few years back, it should still be good, and don't let the merchant tell you it has expired! Even if it has an expiration date stated on the certificate or card, that time limit is invalid in California unless one of the exceptions to Civil Code Section 1749.5 applies.

One last point: Some retailers have tried to get around the statute by imposing "service fees" of $1.00 or $1.50/mo. that begin to eat up the value of the gift certificate or card if it isn't used in 6 months or a year, but those fees are being challenged in class action lawsuits as being tantamount to imposing an illegal expiration date. Chances are that most retailers would reverse the charges for someone who knows about the law and challenges the imposition of the fees, rather than risk getting involved in a class action lawsuit. However, where possible, the best advice is not to let the gift certificate or card go unused for too long to avoid that potential hassle.

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If you have any questions regarding this bulletin, please contact Stacey Olliff, Esq., at 310.281.6306 or solliff@ecjlaw.com. Correspondence regarding information contained in this issue or address corrections should be sent to our Marketing Department at marketing@ecjlaw.com