BILL ANALYSIS
AB 2185
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Date of Hearing: May 4, 2010
ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER
PROTECTION
Mary Hayashi, Chair
AB 2185 (Lieu) - As Amended: April 5, 2010
SUBJECT : Gift certificates.
SUMMARY : Requires disclosures on items resembling gift cards
and prohibits service fees, as specified. Specifically, this
bill :
1)Prohibits a retailer from advertising as a gift certificate or
gift card any promotional item, award, or loyalty that does
not comply with the requirements of California's gift card law
and any other existing laws or regulations pertaining to gift
certificates or gift cards.
2)Requires any item resembling a gift certificate or gift card
that is issued pursuant to an awards, loyalty, or promotional
program, as specified, to meet the following requirements:
a) The front of the item shall disclose the terms and
conditions of use; and,
b) The front of the item shall contain a notice printed in
10-point boldface type that it is not a gift certificate or
gift card.
3)Prohibits any person or entity from selling a gift card usable
with multiple sellers of goods or services that requires a
service fee, including, but not limited to, a service fee for
activation, application, installation, or dormancy.
EXISTING LAW :
1)Prohibits the sale of any gift certificate that contains an
expiration date or service fee.
2)Excepts from those provisions specified gift certificates,
including, but not limited to, those that are distributed by
the issuer to a consumer pursuant to an award, loyalty, or
promotional program without any money or other thing of value
being given in exchange for the gift certificate by the
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consumer, as specified. Gift certificate is defined for these
purposes to include gift cards, but does not include any gift
card usable with multiple sellers of goods or services, as
specified.
FISCAL EFFECT : Unknown. This bill is keyed non-fiscal.
COMMENTS :
Purpose of this bill . According to the author's office, "While
California law addresses closed-loop gift cards, the applicable
consumer protections generally do not apply to open-loop cards
and promotional type gift cards. With respect to promotional
gift cards, expiration dates are allowed provided the expiration
date appears in capital letters in at least 10-point font on the
front of the gift certificate.
"Consumers are generally aware that merchant gift cards sold in
California are precluded from having an expiration date. As
such, they may be under the false impression that a promotional
gift card issued by a retailer does not expire. It is
reasonably likely that a consumer may pocket such a card for
future use, and then later discovers the card has actually
expired and no longer has any value. It some cases, promotional
gift cards have been found to expire within weeks of issuance.
"With respect to open-loop cards, consumers who do not use the
value of the card within a short period of time may be surprised
to discover that the card has expired or that dormancy and other
service fees have reduced the value of the card."
Background . There are two types of gift cards: closed-loop
cards and open-loop cards. Closed-loop cards are accepted at a
single merchant or group of affiliated merchants, and are
typically issued by those merchants. Open-loop cards are those
that can be used with multiple unaffiliated sellers of goods or
services -- for example, a card that can be used at all or some
of the stores at a particular mall.
While California law addresses closed-loop gift cards, the
applicable consumer protections do not apply to open-loop cards
and promotional type gift cards. The following items are not
considered gift cards, and thus are not subject to California
gift card laws:
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1)Gift certificates that are distributed by the issuer to a
consumer pursuant to an awards, loyalty, or promotional
program without any money or other thing of value being given
in exchange for the gift certificate by the consumer.
2)Gift certificates that are donated or sold below face value at
a volume discount to employers or to nonprofit and charitable
organizations for fundraising purposes if the expiration date
on those gift certificates is not more than 30 days after the
date of sale.
3)Gift certificates that are issued for perishable food
products.
4)Gift cards that can be used with multiple unaffiliated sellers
of goods or services, provided the expiration date, if any, is
printed on the card.
5)Prepaid calling cards issued solely to provide an access
number and authorization code for prepaid calling services.
Generally, gift cards cannot contain a service fee unless the
value remaining on the gift card is $5 or less each time the fee
is assessed, the dormancy fee is $1 per month or less, the card
has been inactive for 24 consecutive months, the holder may
reload or add value to the card, and the card has printed on it
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. This statement may be
on the front or back of the card, but must be visible to the
purchaser prior to purchase.
Notwithstanding any policy of the seller, a gift certificate
with a cash value of less than $10 is redeemable in cash for its
cash value. Where a seller accepts funds toward a gift
certificate from one or more contributors as a gift for another
person, the seller must give each contributor a full refund of
the amount paid toward the certificate if the recipient does not
redeem the funds by the time disclosed.
A seller of unaffiliated, multiple seller cards without an
expiration date -- many of which are sold by banks like pre-paid
debit cards -- may take the position that such cards are not
included in the definition of "gift certificate," and therefore
service fees or dormancy fees can be imposed without being
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disclosed.
Arguments in support . Consumers Union writes, "AB 2185 requires
consumers to be informed of which cards are truly gift cards by
prohibiting retailers from labeling promotional, award, or
loyalty cards, from being mistaken as gift cards or gift
certificates. Labeling promotional, award or loyalty cards as
gift cards or gift certificates is misleading as they do not
carry the same protections as traditional or true gift cards.
Until the protections behind these cards have the same
protections as traditional retailer gift cards, they should not
be labeled as such.
"Gift cards are popular and very profitable. These profits
should not be generated through numerous back end fees. We
strongly support AB 2185's intent to eliminate all fees from
open-loop gift cards."
Arguments in opposition . California Independent Bankers write,
"Many community banks in California offer [open-loop gift cards]
and the cards we sell include some of the fees prohibited under
AB 2185. These are popular with many of our banks' customers
and our cards often have lower fees than many other multi-use
cards sold elsewhere. It makes no sense to ban this popular
product when the fees are clearly disclosed to consumers and the
marketsplace is very competitive in this area."
REGISTERED SUPPORT / OPPOSITION :
Support
CALPIRG
Consumers Union
Opposition
California Retailers Association
CalChamber
California Association of College Stores
TechAmerica
California Grocers Association
California Bankers Association
California Independent Bankers
Analysis Prepared by : Sarah Weaver / B.,P. & C.P. / (916)
AB 2185
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