Colorado Enacts Law on Gift Cards; Update on Other States’ Cash Redemption Rules

Amidst the hullaballoo over Colorado’s recently enacted affiliate nexus and out-of-state vendor reporting requirements and its recent economic nexus regulation, Colorado also passed a new law regarding gift cards.

Under the new law, signed by Governor Ritter on April 29, issuers of gift cards, including actual cards and electronic cards, must redeem the remaining value of a gift card for cash if there is $5 or less remaining on the card and the holder of the card so requests. Additionally, sellers may not sell gift cards which contain a service fee, dormancy fee, inactivity fee, maintenance fee, or any other type of fee. The new law does not apply to gift cards which are useable with multiple sellers, unless the multiple sellers are affiliated sellers. Violations of the new statute are deemed deceptive trade practices under Colorado law.

Other states have similar laws and/or pending legislation regarding cash refunds for low balances on gift cards and certificates:

California: Currently permits cash refunds for gift certificates with cash value less than $10. See Cal. Civ. Code § 1749.5(b)(2). California has legislation currently before its Senate that would raise the threshold amount to $20.

Maine: Requires cash refunds for gift and stored value cards with less than $5 remaining on request, except in the case of prepaid telephone cards, cards with an initial value of $5 or less, and cards that were not purchased but were provided as a promotion or as a refund where no receipt was provided. See Me. Rev. Stat. tit. 33, § 1953(1)(G).

Massachusetts: For gift certificates to which value may be added and which have been redeemed in part, the holder of the gift certificate may request the remaining balance be paid in cash once its value falls below $5. For gift certificates prohibiting the holder from adding additional value, the holder can request the balance be paid in cash once 90% of the face value has been redeemed. See Mass. Gen. Laws ch. 200A, § 5D.

Montana: Gift certificates with original values of greater than $5, with less than $5 remaining, must be redeemed for cash on request. See Mont. Code Ann. § 30-14-108(4).

Vermont: If the remaining value of a gift certificate is less than $1.00, the gift certificate is redeemable in cash for its remaining value on demand of the gift certificate’s holder. See Vt. Stat. Ann. tit. 8, § 2704.

Washington: If, after a purchase is made with a gift certificate, the remaining value is less than $5, the gift certificate must be redeemable in cash for its remaining value, on demand of the bearer.  See Wash. Rev. Code § 19.240.020(3).