Legal restrictions on gift cards and certificates
Pursuant to Civil Code Section 1749.5, it is unlawful to sell gift certificates with an expiration date. It is also unlawful to refuse to redeem for cash when the certificate value is less than $10. Different rules may apply to promotional and discount certificates.
If your restaurant sells gift certificates, follow these simple rules to avoid violation of the law:
- Don’t provide an expiration date. The certificate must remain valid and redeemable until used, redeemed for cash, or replaced with a new gift certificate.
- Don’t charge a service or dormancy fee. Fees are not permissible except in limited situations and subject to strict rules as promulgated in Section 1749.5(e).
- If the gift certificate is for less than $10 or when the value drops below $10, the purchaser or holder is entitled to receive the face value in cash, even if no purchase is made.
To avoid potential confusion or error, it may be effective to implement internal policies to not issue gift certificates for less than $10 increments and always offer cash back when the value drops below $10. By doing so, you can avoid confusion when a customer asks for cash back.
Promotional and discount certificates may contain an expiration date if the expiration date appears in capital letters in at least 10-point font on the front of the certificate and:
- Is provided for free as part of an awards, loyalty or promotional program or
- Is donated or sold below face value at a volume discount to employers or nonprofit charitable organizations for fundraising purposes with an expiration date not more than 30 days after date of sale.
While the code does confer certain exceptions to food products, the attorney general issued an opinion letter that concluded the food products exception was inapplicable to restaurants.
The law applies only to cards issued by specific restaurants/stores. The California law does not apply if the card can be used anywhere, such an American Express, Mastercard, or Visa gift card.
This report was reviewed for legal accuracy and updated in 2015 by Berliner Cohen.