By Josh S. Cutler, Esq.
Coletta & Cutler LLC
So you got a gift certificate over the holidays? (Or was it the year before?) Despite the best of intentions, those gift certificates and gift cards can sometimes pile up in your drawer after a time. How long are they good for? is there a difference between a store credit and a gift certificate? What fees can be charged? What are the rules? The good news is that Massachusetts has some very pro-consumer laws when it comes to gift cards. Here’s a quick overview of some commonly asked questions. Please keep in mind this is all based on Massachusetts law and would not apply to gift cards purchased in other states.
What is a gift certificate/card? Before the advent of gift cards, we used the term gift certificate, which traditionally referred to a written certificate valued at a certain amount of money that was redeemable for the purchase of goods or services. Massachusetts law has expanded this definition to now include electronic gift cards and merchandise credits. Pre-paid phone calling cards are not considered gift certificates, nor are general use electronic gift cards, the type usable with multiple unaffiliated merchants. (M.G.L. Ch. 255D, Sec. 1)
How long is a gift card good for? Gift cards must be good for a minimum of seven (7) years in Massachusetts. (M.G.L. Ch. 200A, Sec. 5D)
My gift card doesn’t have an expiration date. What does that mean? For a traditional gift certificate if there is no expiration date then the card if good in perpetuity (or until the store closes!) For an electronic gift card the same standard applies, unless: 1) the merchant issued a sales receipt at time of purchase with a date of issuance and date of expiration clearly printed; or 2) the issuance date and expiration date are readily available on merchant’s website or via a toll free number. In either case, the gift certificate is still good for at least seven (7) years. (M.G.L. Ch. 200A, Sec. 5D)
What about merchandise credits? Merchandise credits are treated like gift certificates and the same standard applies. If a store gives you a merchandise credit for returned goods you have at least seven (7) years from that date to redeem the credit.
What can I do if there is only a small balance left on my gift card? Once your gift card has 10% or less of the face value remaining you may choose to get the balance back in cash. For gift cards that are reloadable (the kind you can add money to) you may also elect to cash out once the value is $5 or less. (M.G.L. Ch. 200A, Sec. 5D)
Can I be charged a fee for my gift card? You may not be charged any dormancy fee (for non-use), administrative fee, periodic fee, or other service fee that reduce the redemption value of your gift card. (M.G.L. Ch. 266, Sec. 75D). You may be charged a purchase fee, activation fee or renewal fee, but only if notice is provided in writing either on the gift card itself on the packaging of the gift card. (M.G.L. Ch. 266, Sec. 75E). Merchants can be fined $300 for violation of either provision. Please note this restriction does not apply to credit card gift cards or gift cards issues by national banks (read more below).
Are there any penalties if the merchant doesn’t comply? Yes, merchants that refuse to redeem a gift certificate before the expiration date or try to impose a time limit of less than seven years can be fined three hundred dollars. (M.G.L. Ch. 266, Sec. 75C). They are also not permitted to impose a gratuity on the gift card redemption without your consent. (M.G.L. Ch. 266, Sec. 75F)
Does this law apply to every kind of gift card used in Massachusetts? No. This is an important caveat. Gift cards that are issued by a national bank are not subject to state law. They are subject to federal law, which has fewer consumer protections. National bank cards are sometimes issued by shopping malls and other large merchants so please check the fine print.
What if the retailer goes out of business? This is really dependent on the situation. If the retailer filed for bankruptcy protection, you should file a document called a “proof of claim” with the court. Depending on what kind of bankruptcy was filed you may still be able to get some reimbursement for the value of the gift card. If you believe a business has unfairly taken advantage of consumers, the Attorney General’s Office may also bring a legal action seeking recovery of the value of unredeemed gift. In some cases a successor business may still agree to redeem at least a portion of value of your gift certificate to earn good will and build customers loyalty so make sure to ask!
How can I get more information or file a complaint? The Mass. Attorney General’s office and the Mass. Office of Consumer Affairs department are the two best places to start. A Consumers Guide to Shopping Rights is posted here and a more specific guide to state gift certificate law is posted here.
Credits: Sources used for this article include the website of the Mass. Attorney General’s office and the Mass. Office of Consumer Affairs, as well as the Massachusetts Practice Series on Consumer Law. s. 3:51 (3d ed.) and the Attorney General’s “Guide to Retail Rights”, October 2015.