If you live in Colorado and give or receive gift cards, there are some positive changes around the corner. According to Colorado Senate Bill 10-115, gift cards issued on or after August 11, 2010 will be governed by new state law. Here is a quick summary of what you can expect to change:
1. No more post-sale fees or purchase fees.
2. Merchant's are required to give cash back for gift cards with a balance of $5.00 or less, upon request.
It's important to note: gift cards can still expire at any time and several types of gift cards are excluded, most notably bank issued gift cards (Visa, MasterCard, American Express), phone cards and promotional/loyalty gift cards given away for free.
New Federal Gift Card Law starts August 22, 2010
Colorado's changes to gift card law are sure to be overshadowed by the new federal gift card laws going into effect August 22, 2010. For Colorado consumers this means gift card funds may not expire within 5 years (bank issued gift cards are specifically included). Also, bank issued gift cards may not charge a fee unless the card has been inactive for at least one year and then it may only be one fee per month.
Colorado Is Giving Businesses An Incentive To Impose Expiration Dates
Colorado is a states which does two things and, in turn, gives gift card issuers a good reason to impose an expiration date:
1. Colorado sets no limits on expiration dates.
2. Unused balance of gift cards must be turned over to the State of Colorado after 5 years of inactivity.
Let's consider two scenarios:
Company A's gift card expires in 5 years from purchase (the federal minimum).
Company B's gift card has no expiration date.
Assuming the same $100 gift card purchased 6 years ago and is inactive for 5 years:
Company A will recognize the gift card balance as earned revenue because the card has expired 5 years from purchase and it's never considered unclaimed property by the State of Colorado.
Company B will have to turn the balance over to the state (less $25.00) as mandated by unclaimed property law. When the customer comes in to redeem their gift card 7 years after purchase, Company B will honor the gift card in accordance with store policy and then must go to the state for reimbursement of the funds they've already turned over as unclaimed property.
Case And Point
If a business has to turn the money over to the state, they have less reason to offer a consumer friendly gift card program with no expiration date. As a result, Colorado's Grade on ScripSmart remains F even thought they've improved the protection for consumers.