BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 885|
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VETO
Bill No: SB 885
Author: Corbett (D), et al
Amended: 8/18/10
Vote: 21
SENATE JUDICIARY COMMITTEE : 3-2, 3/23/10
AYES: Corbett, Hancock, Leno
NOES: Harman, Walters
SENATE FLOOR : 21-12, 6/3/10
AYES: Aanestad, Alquist, Cedillo, Corbett, DeSaulnier,
Ducheny, Florez, Hancock, Kehoe, Leno, Liu, Lowenthal,
Oropeza, Pavley, Price, Romero, Simitian, Steinberg,
Wiggins, Wolk, Yee
NOES: Ashburn, Calderon, Cogdill, Denham, Dutton, Huff,
Negrete McLeod, Runner, Strickland, Walters, Wright,
Wyland
NO VOTE RECORDED: Correa, Cox, Harman, Hollingsworth,
Padilla, Vacancy, Vacancy
ASSEMBLY FLOOR : 50-26, 8/23/10 - See last page for vote
SENATE FLOOR : 25-8, 8/25/10
AYES: Aanestad, Alquist, Blakeslee, Calderon, Cedillo,
Corbett, Correa, DeSaulnier, Ducheny, Florez, Hancock,
Kehoe, Leno, Liu, Lowenthal, Padilla, Pavley, Price,
Romero, Simitian, Steinberg, Strickland, Wolk, Wright,
Yee
NOES: Ashburn, Cogdill, Dutton, Emmerson, Huff, Runner,
Walters, Wyland
NO VOTE RECORDED: Denham, Harman, Hollingsworth, Negrete
McLeod, Oropeza, Wiggins, Vacancy
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SUBJECT : Gift cards: dormancy fees: redemption
SOURCE : Author
DIGEST : This bill deletes exemptions to applying
dormancy fees on gift certificates, thus prohibiting them,
as specified.
Assembly Amendments delete the Senate version provision
requiring a retailer of gift certificates to disclose that
a gift certificate with a value of less than $10 may be
redeemed for cash, for its cash value.
ANALYSIS : Existing law:
1. Makes it unlawful to sell a gift certificate that
contains an expiration date or a service fee, including,
but not limited to, a service fee for dormancy.
2. Requires any gift certificate sold after January 1,
1997, to be redeemable in cash for its cash value, or
replaceable with a new gift certificate at no cost to
the purchaser or holder.
3. Requires any gift certificate with a cash value of less
than $10 to be redeemable in cash for its cash value.
4. Exempts from the requirements above, the following gift
certificates issued on or after January 1, 1998, with
the expiration date appearing in capital letters in at
least 10-point font on the front of the gift
certificate:
A. Those distributed by the issuer to a consumer
pursuant to an awards, loyalty, or promotional program
for free;
B. Those donated or sold below face value at a volume
discount to employers or to nonprofit and charitable
organizations for fundraising purposes if the
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expiration date on those gift certificates is less
than 30 days after the date of sale; and,
C. Gift certificates that are issued for perishable
food products.
5. Exempts dormancy fee requirements for the following gift
cards when:
A. The remaining value of the gift card is $5 or less
each time the fee is assessed;
B. The fee does not exceed $1 per month;
C. There has been no activity on the gift card for 24
consecutive months, including, but not limited to,
purchases, adding value, or balance inquiries;
D. The holder may reload or add value to the gift
card; and,
E. A statement is printed on the gift card in at least
10-point font stating the amount of the fee, the
frequency of the fee, that the fee is triggered by
inactivity of the gift card, and when the fee will be
charged. The statement may appear on the front or back
of the gift card, but shall appear in a location where
it is visible to any purchaser prior to purchase.
This bill deletes exemptions to applying dormancy fees on
gift certificates, thus prohibiting them, as specified.
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
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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
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
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.
This problem is so common that around $5 billion in
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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.
GOVERNOR'S VETO MESSAGE:
"I am returning Senate Bill 885 without my signature.
This bill can place an additional burden on small
businesses that offer gift certificates and cards.
Those small businesses are required to maintain some
record of the card or certificate as a liability on
the books and eventually pay taxes on the revenue
whether or not the certificate is redeemed. I believe
existing law acknowledges a reasonable cost of
business to help offset the record-keeping and other
administrative expenses of dormant gift certificates
and gift cards. Therefore, I do not believe a change
to current law would be prudent.
For these reasons, I am unable to sign this bill."
ASSEMBLY FLOOR :
AYES: Ammiano, Arambula, Bass, Beall, Block, Blumenfield,
Bradford, Brownley, Buchanan, Caballero, Charles
Calderon, Carter, Chesbro, Coto, Davis, De La Torre, De
Leon, Eng, Evans, Feuer, Fong, Fuentes, Galgiani, Gatto,
Hayashi, Hernandez, Hill, Huber, Huffman, Jones, Lieu,
Bonnie Lowenthal, Ma, Mendoza, Monning, Nava, V. Manuel
Perez, Portantino, Ruskin, Salas, Saldana, Skinner,
Solorio, Audra Strickland, Swanson, Torlakson, Torres,
Torrico, Yamada, John A. Perez
NOES: Adams, Anderson, Bill Berryhill, Tom Berryhill,
Conway, Cook, DeVore, Fletcher, Fuller, Gaines, Garrick,
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Gilmore, Hagman, Harkey, Jeffries, Knight, Logue, Miller,
Nestande, Niello, Nielsen, Norby, Silva, Smyth, Tran,
Villines
NO VOTE RECORDED: Furutani, Hall, Vacancy, Vacancy
RJG:nl 10/5/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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