Store Research

Assembly Bill 1092 (Harman-2003)

Chapter 116, Statutes of 2003

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Addressing Assembly Bill 1092 as last amended on June 30, 2003, the Third Reading Analysis of the Office of Senate Floor Analyses provided the following digest of its provisions:

This bill generally prohibits the sale of any gift certificate that contains a service fee. However, the bill exempts gift cards with an unredeemed value off [sic] five dollars ($5) or less, and allows service fees of up to one dollar ($1) per months [sic] on these cards.
(See Exhibit #8, page 1)

The Assembly Committee on Business and Professions discussed the background of the bill as it was first considered:

According to the author, "a gift certificate sold without an expiration date is valid continuously except when refunded or replaced with a new gift certificate." The author also states that charging state consumers a monthly maintenance, tracking or service fee appears to be a violation of existing law prohibiting expiration dates on gift certificates. The provisions of this bill are intended to prohibit the sale of any gift certificates containing service fees, and clarify that "gift certificate" includes the retail sale of gift cards.
(See Exhibit #3, page 1)

The Senate Committee on Judiciary stated further regarding the need for the bill that:

Press reports and consumer complaints have identified several questionable practices connected with sale and redemption policies for gift certificates and cards, including the widespread use of certificate expiration dates even though most sellers would suffer no harm or loss from delayed redemption. In legislation that has become a model for other states that have begun to act on these complaints, California has prohibited expiration dates on most classes of gift certificates (AB 2466 (Goldsmith), Ch. 933, Stats. of 1996).

Recently, sellers have begun to impose monthly "service fees" on gift certificates and cards that have been unused for a period of time. This practice is especially profitable on gift cards, which are designed for incremental use over extended time periods, and apparently are even more susceptible than traditional paper certificates to being partially unredeemed and forgotten. Service fees gradually extinguish the unredeemed value of the cards, providing an unearned benefit to the seller.

Consumer groups argue that the administrative costs of carrying unredeemed gift card value is negligible at best, and that service
fees constitute an unfair attempt by sellers to erode the value of a product for which they already have received fair payment. This bill would prohibit the imposition of service fees on most gift certificates and cards, as specified below.
(See Exhibit #6, pages 1 and 2)

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