October 15, 2007

California’s Gift Card Cash Redemption Law Approved

Incredible! Gov. Arnold Schwarzenegger on Saturday, October 13, 2007, signed California Senate Bill ‘SB 250′ into law. Essentially, SB 250 amends Section 1749.5 of the Civil Code to “allow any gift certificate with a cash value of less than $10 to be redeemed in cash, as defined, for its cash value”. Currently, the only other state that allows gift card redemption for cash is Washington state and for gift cards with a cash value less than $5.

However, before you rush out to redeem your gift cards for cash, the new California gift card redemption law does have exemptions to it. The same exemptions in Section 1749.5 that allows certain gift cards to have expiration dates are also applied to the redemption of gift cards for cash. As a refresher, any gift cards that was issued as an award, loyalty or promotional program cannot be redeemed for cash. In addition, gift cards sold at volume discount to employers, non-profits, or charities for fundraising purposes are also exempted.

In addition, there was a minor adjustment governing expiration date for gift certificates issued for food products. Before SB 250 was signed into law, grocery stores can put expiration dates on their gift cards. However, with the new law, only gift cards issued for ‘perishable’ food products can have an expiration date and not all food products. It is going to be interesting to see how grocery stores adjust to this new law with expiration and redemption. As a final note, SB 250 was championed by State Sen. Ellen Corbett, D-San Leandro.

With this new law, Californian consumers do not have to spend more than the face value of the gift card to get the full value of their presents. When Johnny gets a $50 Best Buy gift card from Granny, he can find a present for less than $50 and pocket the change versus having to give Best Buy the change or spending over $50. This new law just swung the pendulum in the favor of the consumer away from the merchants. Massachusetts is also considering a similar redemption law and most states have a tendency to follow what California does. Expect to see efforts from retail associations and national chains to amend, limit this new law, and contain it from spreading.

Governor is clearing his desk of bills [Sacramento Bee]
California Senate Bill ‘SB 250′ [Official California Legislative Info]

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