BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 885|
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THIRD READING
Bill No: SB 885
Author: Corbett (D), et al
Amended: 5/28/10
Vote: 21
SENATE JUDICIARY COMMITTEE : 3-2, 3/23/10
AYES: Corbett, Hancock, Leno
NOES: Harman, Walters
SUBJECT : Gift cards: dormancy fees: redemption
SOURCE : Author
DIGEST : This bill requires that a gift certificate
contain a statement that a gift certificate or gift card,
as defined, with a remaining cash value of less than $10
may be redeemed in cash for its cash value. This bill
deletes provisions of current law that allow for a dormancy
fee for nonuse of the gift certificate or card if specified
conditions are met.
Senate Floor Amendments of 5/28/10 strike the proposed
increase from $10 to $20, thus restoring the requirement
that a gift certificate with a cash value of less than $10
may be redeemed in cash, as defined, for its cash value.
The remaining provisions of the bill would remain
unchanged.
Senate Floor Amendments of 4/5/10 make a technical revision
and add co-authors.
CONTINUED
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ANALYSIS : Existing law provides that "gift certificate"
includes gift cards, but does not include any gift card
usable with multiple sellers of goods or services, provided
that the expiration date, if any, is printed on the card.
This exemption does not apply to a gift card usable only
with affiliated sellers of goods or services. (Civ. Code
Sec. 1749.45.)
Existing law provides the following:
1. It is unlawful for any person or entity to sell a gift
certificate that contains an expiration date or a
service fee, including, but not limited to a service fee
for dormancy, except as specified;
2. Any gift certificate sold after January 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;
3. Any gift certificate with a cash value of less than $10
is redeemable in cash for its cash value; and
4. A gift certificate sold without an expiration date is
valid until redeemed or replaced. (Civ. Code Sec.
1749.5(a)-(c).)
Existing law provides that any waiver of the provisions
relating to gift certificates is contrary to public policy,
and is void and unenforceable. (Civ. Code Sec. 1749.51.)
This bill requires a statement to be printed on the gift
certificate in at least 10-point font stating that any gift
certificate with a cash value of less than $10 is
redeemable in cash for its cash value. The bill would
provide that the statement may appear on the front or back
of the gift certificate, but must appear in a location
where it is visible to any purchaser prior to purchase.
Existing law provides that a dormancy fee may be charged on
a gift card, if all of the following criteria are met:
1. The remaining value of the card is $5 or less each time
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the fee is assessed;
2. The fee does not exceed $1 per month;
3. There has been no activity on the card for 24
consecutive months;
4. The holder may reload or add value to the card; and
5. A statement is printed on the card in at least 10-point
font stating the fee amount, how often the fee will
occur, that the fee is triggered by card inactivity, and
at what point the fee will be charged. (Civ. Code Sec.
1749.5(e).)
This bill deletes these dormancy fee provisions.
Prior Legislation
SB 250 (Corbett), Chapter 640, Statutes of 2007
Background
Over the last several years, gift cards have become
increasingly popular as a means of gift-giving. According
to TowerGroup, a financial consulting firm, Americans spent
$88.4 billion on gift cards in 2008, but left $6.4 billion
unspent and more than $100 million in gift card value was
"compromised" in bankruptcies and liquidations. Also
according to TowerGroup, in 2009, Americans spent $87
billion on gift cards, an estimated $5 billion of which
will go unredeemed. It is also reported that, in the U.S.,
40 percent of recipients do not use the full value of their
gift cards. Often the unredeemed amounts go back to the
retailers as revenue. This is a staggering amount of money
for consumers to lose.
Because of the concerns outlined above, Senator Corbett
authored SB 250. SB 250 allowed any gift certificate with
a cash value of less than $10 to be redeemed in cash for
its cash value. The bill exempted donated gift
certificates and gift certificates for perishable food
products from existing law's restrictions on expiration
dates and service fees. SB 885 is intended to build upon
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and strengthen SB 250 by giving California consumers the
full value of their gift cards by allowing them to redeem
for cash gift cards with a cash value of less than $20.
Additionally, the bill would delete the dormancy fee
provisions, which would also ensure that consumers receive
the full value of their gift cards.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
SUPPORT : (Verified 5/28/10)
California Labor Federation
California Public Interest Research Group
Congress of California Seniors
Consumer Action
Consumer Attorneys of California
Consumer Federation of California
Consumers Union
OPPOSITION : (Verified 5/28/10)
California Independent Oil Marketers Association
California Restaurant Association
California Small Business Association
Chambers of Commerce Alliance of Ventura & Santa Barbara
Counties
CVS/CAREMARxK
Economic Vitality Corporation of San Luis Obispo
Filipino American Chamber of Commerce
National Federation of Independent Business
Northern California Independent Booksellers Association
Rite Aid
Southern California Independent Booksellers Association
SVM/LP Gasoline and Retail Gift Cards
ARGUMENTS IN SUPPORT : According to the author's office:
In these difficult economic times, consumers should
have the right to ready access to liquid assets,
including the cash value of their gift cards. The
remainder on their unused gift cards could make the
difference in paying bills and making ends meet.
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This problem is so common that around $5 billion in
gift cards goes unspent every year. After a few years
the retailer gets to claim the consumer's money as
profit without supplying a product or paying sales
tax. Companies have claimed as much as $43 million in
profit from unspent gift cards in one year.
While consumers gained new rights under SB 250
(Corbett, Ch. 640, Stats. 2007), many retailers are
refusing to comply with the law. Starbucks was taken
to court in three counties by the District Attorney
and agreed to pay $225,000 in civil penalties for not
complying with the law.
ARGUMENTS IN OPPOSITION : The National Federal of
Independent Business (NFIB) opposes this bill primarily on
the ground that it may hurt small businesses. The small
business concerns appear to fall into three primary
categories. NFIB also states that because small businesses
operate on a thin profit-margin, they would not be able to
predict or plan for gift certificate cash-outs. NFIB also
states that when a gift certificate is purchased using a
credit card the small business owner pays a so-called
"interchange fee" for the ability to access the network.
CVS/CAREMARxK also opposes the bill on many of the same
bases as NFIB and states that it will increase the
potential for the fraudulent use of gift cards.
RJG:nl 6/1/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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