California Bans Most Service Fees on Gift Certificates

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By Consumers Union on Monday, August 4th, 2003

California Bans Most Service Fees on Gift Certificates

Gift cards, a form of electronic gift certificates, are proliferating. The Wall Street Journal estimated in Feb. 2003 that $36 to $38 billion in gift cards were sold in 2002, and that the amount of money left unused on gift cards is $2 billion a year and growing. Some retailers now impose a monthly service fee on gift cards which are not fully spent after a specified time, such as one or two years.

A new law going into effect January 1, 2004 in California bans nearly all service fees on retailer gift cards and gift certificates. The new law bans service fees, with one limited exception. On a rechargeable card with a balance of $5 or less, the issuer may charge a dormancy fee of $1 per month after 24 months of inactivity. Even a balance inquiry counts as activity that prevents this fee. All other service fees are prohibited.

The new law applies to gift certificates sold on or after January 1, 2004. Under preexisting California law, gift certificates may not expire. The new statute amends California Civil Code section 1749.5. The text of the new statute can be found at http://www.leginfo.ca.gov/pub/bill/asm/ab_1051-1100/ab_1092_bill_20030724_chaptered.pdf.

For California consumers, the California Department of Consumer Affairs has posted a set of frequently asked questions and answers to assist consumers. You can find that information by clicking here.

Media inquiries about the California gift certificate and gift card fee ban should be directed to:

Consumers Union of U.S.
West Coast Regional Office
1535 Mission St.
San Francisco CA 94103
(415) 431-6747

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