Gift Card Blog - ScripSmart

Gift Cards, Bankruptcy, Blockbuster and California Section Code 1749.6

Earlier this week, I received an email from a California consumer regarding thee gift cards. Clearly Liz had done some research and is a savvy consumer, she writes:

"I am in possession of 3 older Blockbuster Gift cards and I went to use them the other night. Opps, I found out that even though they are selling NEW gift cards, they are no longer accepting old ones.

I have looked into the California State Gift Card Law and California Civil Code 1749.6 that states even if a company goes into Bankruptcy, it needs to honor the gift cards purchased before bankruptcy.  I have called Blockbuster and got no where.

DO you have any advice for me? It's not really about the amount of money on the cards - it's the principle at this point."

My Advice

We should all aim to use our gift cards sooner than later.

If you're a person who tends to forget about them, sign up for a free ScripSmart account so you can be reminded monthly of the gift cards you own. We also send out alerts when we catch wind a gift card may soon become worthless.

In fact, we sent out several alerts to those who registered a Blockbuster Gift Card in their ScripSmart account and the first one was months before the gift card actually became worthless. It's ScripSmart's solution to a common problem consumers face with gift cards.

California Section Code 1749.6 

Liz also mentions California Gift Card Law in her note. Specifically, section 1749.6(b) which states:

"An issuer of a gift certificate who is in bankruptcy shall continue to honor a gift certificate issued prior to the date of the bankruptcy filing on the grounds that the value of the gift certificate constitutes trust property of the beneficiary."

I'm a fan of seeing such a law on the books because it helps give consumers one last opportunity to redeem their gift card while the business is liquidating it's assets.

But section 1749.6(b)  does not help Liz and other holders of the "Old Blockbuster Gift Card" recoup any value. It's confusing and one of the reasons I wasn't happy to see Blockbuster start issuing a new gift card less than a year after it's gift cards had become worthless.

Keep in mind, there are two different types of Blockbuster Gift Cards in consumer's hands right now:

Issued by Blockbuster, Inc. = Old Gift Card (worthless)

Issued by Blockbuster, LLC = New Gift Card

You have to look at the back of the card to determine which one you have. This difference offers some insight into why Blockbuster is not currently violating California Gift Card Law.

The Old Blockbuster Gift Card is what has been issued for years and it was honored while Blockbuster Inc. was in bankruptcy (up until April 2011). That process ended when Dish Network purchased the assets (brand, locations, etc.) of Blockbuster, Inc. and then formed Blockbuster, LLC. 

Blockbuster, LLC is a completely separate legal entity and is not in bankruptcy and never was in bankruptcy. Dish Network was given the option to accept the Old Blockbuster Gift Cards, but they were not required to do so by the Bankruptcy Court.

It's all much more confusing than it should be and I really wish Dish Network would not have introduced this level of confusion to the marketplace, it's simply bad for consumers and the gift card industry as a whole.

Oregon Cash Back Law For Gift Cards - Effective January 1st, 2012

June of last year, Oregon passed SB 756. In short, it requires all gift cards which are sold to be redeemed for cash if the balance is $5 or less and the gift card has been used at least once. The effective date of this legislation is January 1st, 2012.

I'm a fan of seeing cash back laws. The fact is, a consumer should not be required to spend more than the balance of a gift card in order to receive the full benefit and just 3.6% of store-issued gift cards offer a cash back option unless required by law. Because so few retailers offer a cash back policy, you can expect to see more states enact similar legislation in the future.

Not Retroactive, 2011 Christmas Gifts Are Exempt

This change to Oregon Gift Card Law is not retroactive. In other words, all of the gift cards purchased prior to January 01, 2012 are not covered by the new law. So if you received a gift card for christmas this year the merchant is not required to give you cash back. This is only for gift cards sold on January 1st, 2012 and moving forward.

Oregon Got It Right

There are several states with Cash Back Laws. The laws vary slightly, but I think a $5 threshold is reasonable for both consumers and businesses. Thankfully the legislators in Oregon decide to make this rather simple. However, the legislators in Massachusetts did a poor job of crafting a law which is easy for everyone to understand and, in turn, comply.

Massachusetts General Law Part II Title II Chapter 200A, Section 5D reads:

"A purchaser or holder of a gift certificate which, by its terms, prohibits the purchaser or holder from adding value thereto and which has been redeemed for at least 90 per cent of its face value shall make an election to receive the balance in cash or continue using the gift certificate. A purchaser or holder of a gift certificate which, by its terms, authorizes the purchaser or holder to add value thereto and which has been redeemed in part, such that the value remaining is $5.00 or less, shall make an election to receive the balance in cash or continue using the gift certificate."

That's a mouth full and not very easy for consumers or business owners to understand. I'm not sure why the notion of adding value would even be a factor. Furthermore, adding a percentage in the mix just seems to over complicate the situation. In short, a gift card is redeemable for cash if:

1. The gift card is not reloadable, has been used at least once and the balance is less than $5

2. The gift card is not reloadable and at least 90% of the funds have been redeemed.

For more detail, take a look at ScripSmart's full list of cash back laws for gift cards for each state. Cheers to Oregon's legislators for getting this one right.

Facebook Gift Cards And Gift Card Laws: Buyer Beware

10/15/11 UPDATE: Facebook has updated it's Payment Terms. Facebook credits no longer expire. However, if unclaimed property laws apply to your Facebook Credits, they may be turned over to the state.

Earlier this year, major retail outlets such as Target and Walmart started selling the Facebook Gift Card. We just recently got around to reviewing the gift card and generating a Gift Card Score. There are a few important things to note if you are considering this product.

Facebook Credit Terms vs Facebook Gift Card Terms

The Facebook Gift Card is used to purchase Facebook Credits, the virtual currency used on Facebook to play games and buy virtual goods on Facebook. In short, the Facebook Gift Card does not expire or have any fees. Naturally, this is great to see. However, the gift card may only be redeemed in full to purchase Facebook Credits. After you redeem your gift card and convert it to Facebook Credits, the terms governing the value held by Facebook is significantly different.

Here are a couple of important thing to know when looking at the Facebook's Payment Terms:

• Facebooks says they "may redeem those credits by sending virtual gifts to your Facebook friends or donating the credits to a nonprofit organization of our choice..." if the Facebook Credits have been unused for three years.
• "If you deactivate your [Facebook] account and do not reactivate it within 6 months, or if you delete your [Facebook] account, you will lose any accumulated credits."

In other words, the value you place on a Facebook Gift Card could expire before the Federal minimum of 5 years.

I've sent a note into Facebook, but have not heard back. I'll update this post if I hear from them.

Gift Card Law Loophole

Such a policy begs the question: can a company circumvent gift card laws with simple semantics? Instead of calling the value held on behalf of the consumer credits and not dollars?

The laws covering virtual currency are unclear and on the cutting edge. In fact, Facebook is not alone in thier policy of expiring virtual currencies: While writing this post I received an email from iStockphoto informing me:

"This is just a reminder from us at iStockphoto that your iStock credits will be expiring soon. iStock credits expire within 1 year of the date of purchase. So the 2 credits that you purchased on 2010-10-01 will expire on 2011-10-01. "

That's just one year from purchase date. And while I never purchased a gift card to be converted into iStock credits, it's easy the similarities.

What are your thoughts on this matter?

Why State Gift Card Laws Still Matter

August 22, 2010 was a big day for gift cards. It was the effective date of the gift card provision contained within the Credit CARD Act of 2009. The new Federal Gift Card Laws provided enhanced protection for consumers and today is the one year anniversary of the changes.

One of the key aspects of the legislation was including bank-issued gift cards. These are gift cards with Visa, MasterCard, American Express and Discover logos. State gift card laws do not apply to bank-issued gift cards and they were among the worst when it came to fees and expiration dates.

After federal laws went into effect, some companies discontinued their bank-issued gift card programs because they were no longer profitable. Others, altered their programs to be even more consumer friendly than the law requires. In the end, it was a mixed bag, but I see the changes as a positive for consumers and the gift card industry.

State Gift Card Laws Still Matter 

In the end, gift cards are popular as ever. While the federal gift card laws enhanced consumer protection, there are several states with laws exceeding consumer protection provided by those set by the federal government. In other words, state gift card laws still matter and consumers should be aware of their rights.

For example, Oregon Gift Card Law was recently changed to allow consumers to receive a cash refund if the gift card has been used once and the balance is less than $5.00. These changes will be effective January 1, 2012. 

Expect more changes to come in the area of cash back laws. It's something not covered under the federal gift card protections, so it's an obvious enhancement. Also, here is a list of states offering cash back requirements for gift cards.

Maine Improves Gift Card Laws Related To Unclaimed Property

Late last month, Maine legislators passed LD 247 (HP 200). The bill amends Maine Gift Card Law as it relates to unclaimed property. In short, gift cards will still be considered unclaimed property by the State of Maine; however, the date of abandonment has been pushed from 2 years to 5 years of inactivity. Also, a sentence which allowed the gift card issuer to keep 40% of the face value of the gift card when turning the money over to the state was removed.

To sum it up, the full face value of gift cards must be turned over after 5 years of inactivity and according to Maine's Office of Legislative Information, the effective date of these changes is September 28, 2011.

A Step In The Right Direction

Cheers to this Bill's sponsor, Representative Kerri Prescott of Topsham, Maine. This is definitely a step in the right direction. At least gift cards will not be considered abandoned before they can legal expire under Federal Gift Card Law (5 years).

Also, the notion of splitting up the pot between the state and the gift card issuers makes no sense to me; it's good to see this line stricken from the books.

Still Not Enough

I've written several times about why gift card should not be considered unclaimed property. My reasoning has little to do with who should be allowed to benefit from the value of unused gift card and more to do with whether or not a state can be sure they have the right to such property.

Simply put, the location of the gift cardholder is often unknown. Typically a person who purchased the gift card is not the same as the person who actually owns the gift card. That's because most of us buy and give gift cards as gifts. As such, I don't see how a state can be certain they have the right to property. After all, some of the gift cards a state lays claim to will certainly be held by a person residing in another state.

Furthermore, a state who deems gift cards to be unclaimed property is essentially forcing an expiration date. After the value of the gift card is turned over to the state, the merchant no longer has an obligation to honor the gift card. In order to recoup the money, consumers must go to the state treasurer and search for the unclaimed property. Naturally, most consumers never get the cash from the state and it's the state's budget who actually benefits from classifying gift cards as unclaimed property, not the holder of the property.

A Word Of Advice

One of the easiest ways to be a smart gift card consumer is to use them ASAP. Naturally, that's easier said than done. I certainly have had my moments of letting gift cards sit in my wallet. If you're like me, take a look a ScripSmart's gift card alert system. Just sign up for a free account, register the gift cards you own and we'll send you helpful reminders to ensure you're getting the most out of the gift cards. It's really easy.

Gift Card Cash Back Advice - 5 Tips For Getting Your Money

Recently, I received a note from a Washington consumer named Van. In short, Van was looking for a little help in getting cash back for his Olive Garden Gift Card.

He writes:

"I called Red Lobster in Vancouver, WA and was told that the restaurant’s policy is to never refund cash remaining on a gift card, even if only a few dollars. This seems to be in opposition to state law."

Note: Darden Restaurants, Inc. owns Red Lobster and the Olive Garden; the gift cards can be used at any Darden owned location.

Van is correct, Washington Gift Card Law clearly states a consumer can receive cash back for their gift card if the balance is less than $5.00 and the gift card has been used at least once. Keep in mind, Washington excludes some types of gift cards from it's law; namely bank-issued gift cards, gift cards donated to a charity and free loyalty/promotional cards. In other words, there is a chance he may not have been entitled to cash back it the card was given away for free as a promotion or fundraiser.

5 Tips To Get Your Cash

If you come across a merchant who is unwilling to provide cash back for your gift card when the law provides you the option, Here are five steps to take:

1. Find out if they are unaware of the law or if there is another reason why they are refusing to give you cash back.
2. Print out the portion of the section code which state's you are entitled to a cash refund.
3. Ask to speak to a manager and be polite to all the employees during the process.
4. Contact the company's corporate headquarters to report the violation and request resolution.
5. File a complaint with your state's attorney general if #1-4 yield no results.

Here is what Van did:

"I decided to call their Guest Relations’ 800 number. A person named Justin said he would contact their legal department to review the law and, if true, to contact its Washington restaurants so that the personnel will be better educated about the laws governing cash back if less than $5. With your help, I was able to give him the number of the law referenced."

And shortly, Van received a response from guest relations:

"We do apologize that our employees was not well informed about your ability to cash out gift cards with balances of $5 or less in the State of Washington. Please be assured that we did some training in this area with our Vancouver, WA team. You should have no issue doing this on your visit."

So, in the end, the Red Lobster location was unfamiliar with Washington's gift card laws. I can assure you this will not be the last time a company/location will be unfamiliar with state gift card laws. 

It's great to see Darden Restaurants take the appropriate actions: training the staff and getting Van some cash. Cheers to Van for taking the time to go about this the right way and helping Darden identify an area of imporvement; I think Darden owes Van a meal! :)

Gift Card Laws & Groupon's New Terms

Earlier this year, I wrote about Groupon and gift card laws.

Since writing the article, Groupon has changed it's Terms to take more responsibility for the Vouchers it issues on behalf of merchants. Now they specifically state,the "paid for" portion of the Groupon Voucher does not expire.

The old Groupon Terms of Use stated:

"...applicable law may provide that the Merchant is responsible for honoring the cash value that you paid for your Voucher for a period of time beyond the expiration date stated on the Voucher."

The current Terms of Use states:

    "The purchase value does not expire until it is used or refunded...The promotional value will expire by the date stated on the face of the GROUPON unless applicable law prohibits the promotional value from expiring."

A Good Move By Groupon

In my February post, I brought up the notion of gift card cash back laws and why it's obvious state legislators did not intend to include "promotional portions" of gift cards under the law.

Here's a short recap:

If a consumer paid $5 for $10 worth of services, they might be able to use just $5.01 worth of services and demand a cash refund for the $4.99. This implies a consumer would pay just one penny for $5.01 worth of services. That just down't seem right.

At the same time, it's likely state legislators will see the "paid for" portion of a Groupon Voucher as a something very similar to a gift card. Gift card laws are implimneted to protect consumers from having money drained from thier pocket, not to protect promtional value in the fourm of a coupon.

Why It's Not Enough

From the looks of it, Groupon is currently disclosing the promotional value's expiration date, not the paid for value on the actual Voucher. Here is a Groupon from today:

This could easily be seen as a deceptive business practice. After all, most consumers who own such an offer would conclude the value of the Groupon is worthless after the expiration date. In fact, earlier this year, Amway settled gift card lawsuit which has some striking similarities to Groupon's current business practice of placing just one expiration date on each Voucher.

Groupon should specifically include expiration detail for both portions of each Groupon directly on the Voucher.

Clarification Is Needed

Daily deal sites are under a slew of attacks form consumer advocates and lawyers. Just today I learned Connecticut's Attorney General is looking into whether or not Groupon's fall under Connecticut Gift Card Law. I look forward to the day when this is all cleared up. It will be benifical to both consumers and the companies who issue daily deals with the hope of growing their business.

Utah Gift Card Law Changed - No Longer Unclaimed Property

As of July 1st, 2011, gift cards are no longer considered unclaimed property by the state of Utah. This change was a result of Senate Bill 270 and was actually passed into law on March 25, 2009.  Utah Senator Wayne Niederhauser and House Representative Rebecca Lockhart sponsored S.B. 270. Cheers to them for helping modernize Utah's Gift Card Laws.

Why This Is A Good Thing

Considering gift cards as unclaimed property is a bad idea and it's great to see Utah confirming such a belief. There is one predominant factor to consider when deciding whether or not a gift card should be considered unclaimed property: true ownership of the property.

The fact is, the true owner of a gift card is typically unknown by the company who sold the gift card and the state were the gift card was issued. That's problematic because a state's right to seize unclaimed property often requires the property to be within the state's borders in some way.

The true owner of the gift card is typically an unknown because most consumers buy gift cards to give as a gift to another person. Such a person might live in another state or they could move to another state before redeeming their gift card. The bottom line is there is not a simple, effective and accurate way to determine where the person who owns the gift card actually lives.

Using A Butcher's Knife Instead Of A Surgeon's Scalpel

Unfortunately, states which still consider gift cards as unclaimed property often use rather crude ways for determining which gift cards should be turned over as unclaimed property. For example, Nevada Gift Card Law states:

"If a gift certificate is issued or sold in this State and the seller or issuer does not obtain and maintain in his or her records the name and address of the owner of the gift certificate, the address of the owner of the gift certificate shall be deemed to be the address of the Office of the State Treasurer in Carson City."

First off, it's not very reasonable to expect a merchant to know who the gift card was given to at all times. I understand there are merchants who offer the ability to register gift cards, but the vast majority of gift cards are single use and never registered by it's rightful owner.

Second, the net effect of this law results in most gift cards sold in Nevada being deemed to be held by the State Treasurer in Carson City. It's obvious no gift cards will actually be owned by a person at that address and I can tell you first hand I've sent gift cards out of the state which it was originally purchased. This is the butcher's knife, but they need a scalpel if they want to accurately seize unclaimed property.

In The End, It's The State's Budget Who Benefits

One could argue a consumer could search unclaimed property and get the a check for the gift card's value which was turned over to the state; however, the reality is most consumers are unlikely to search for the property and it's even possible a state which they do not live in currently holds the property.

State legislators who want to consider gift cards as unclaimed property are focused more on gaining "free money" for their budget and less on protecting consumers and making the gift card industry more consumer friendly.

It's time to see more state's follow the path of Utah. The simple and fair thing to do here is exclude gift cards from unclaimed property laws.

Oregon Gift Card Law: SB 756 Passed House

Earlier this week, the Oregon House passed Senate Bill 756 (alredy passed by the Senate). This Bill makes an important change to Oregon Gift Card Law and it will help ensure consumer get the full value of their gift cards.

Cash Back For Gift Cards Less Than $5

I've written about this SB 756 twice before. A quick racap:

SB 756 prohibits the sale of gift cards which cannot be redeemed for cash if the balance is less than $5 and the gift card has been used at least once. In other words, this bill is not retroactive and that gift card in your drawer from 7 years ago cannot be redeemed for cash. Only gift cards which are sold after the effective date are included under these new laws. Assuming the Govener signs the bill the effecitve date will be on January 1st, 2012.

Also, "cash" means check or cash.

The House Adds An Exclusion

The House added an interesting amendment to the bill. From what I can determine, they've excluded a redemption method for certian gift cards. Specifically:

"Gift cards redeemed to an online account for the purchase of goods or services."

I believe this excludes a gift card as soon as you enter it into an online account where the balance is stored. For example, if you have an Amazon Gift Card, it can only be redeemed online by entering it into an online account. After doing this, the balance will remain and you'll no longer able to request cash back Amazon.com.

Frankly, this is an odd exclusion and it's the first time I've seen an exclusion based on how a gift card is redeemed.

Cash Back Laws - A Tend To Continue

Oregon is close to joining nine other states which currently offer gift card cash back laws .These laws help consumers get every penny of their gift card's value.

These cash back laws are popular among consumers and I expect more states to enact similar laws in the future. I support cash back laws because they help make gift cards better for consumers and do not pose a significant burden to gift card issuers.

Incentive Gift Cards May Have Worse Terms

Gift cards which carry restrictions or gotchas do not make great gifts. It's the reason why understanding terms and policies is so important before making a purchase.

ScripSmart's gift card reviews and Gift Card Scores are an easy way to help identify consumer friendly gift cards. However, if you're in the market for a bulk gift card purchase on behalf of a business, the terms of the gift card your considering may not be as consumer friendly as it's direct-to-consumer counterpart. In fact, they might even carry an expiration date which is lower than usual 5 years currently allowed under federal gift card law.

A Note To ScripSmart

It's a bit confusing and this post was inspired by a note I received from a ScripSmart visitor looking to purchase ~600 MasterCard Gift Cards. He wrote:

"When trying to work with the gift card providers directly in buying cards directly in bulk, I found that the terms were not nearly as good as the cards I see in retail stores. For example, most of the cards they offer begin accruing inactivity fees after only 6 months and have expiration dates earlier than 5 years. So, my question is - how are they getting around the laws covering gift cards?"

Promotional & Incentive Gift Cards

Federal gift card law provides an exclusion for "loyalty, award, or promotional" gift cards. In fact, several states also exclude such gift cards under their gift card laws. These exclusions allow merchant's to offer time sensitive incentives to consumers. A classic example if the "FREE card with purchase" promotion. For the most part I agree, businesses should be able to offer free gift cards without having to be restricted by federal expiration laws.

Often times you'll see these promotional gift cards labeled as 'incentive cards', 'bonus cards' or 'rewards cards'. This a subtle but important distinction and indicates the terms of the gift card may not be governed by federal gift card laws. For example, when looking at the Vanilla MasterCard, two products are offered: a Vanilla MasterCard Gift Card and a Vanilla MasterCard Rewards Card.

ScripSmart's Focus

Currently, ScripSmart focuses on direct-to-consumer gift cards. For example, we're interested in helping consumers who are considering buying a Bust Buy Gift Card for family or friends, not a Home Depot Gift Card for a corporate rewards or incentive program.

In other words, the abbreviated terms on ScripSmart may vary from the gift card you're considering for a business related purchase. In either case, be sure to understand the terms and policies for the gift card you are considering purchasing.