Gift cards have become the preferred method for celebrating holidays, birthdays, graduations and many other gift-giving occasions. With the pre-payment and often increased sales, many companies are interested in offering gift cards for sale. However, gift cards are often the cause of many retailer headaches. Google is just the latest in a long string of companies that have run into trouble with their gift card offerings.
Last week, Google Inc became the target of a class action lawsuit filed in federal court in California. The suit alleges that Google did not issue a cash refund on a gift card less than $10, as required by California law. The refund requirement was intended to decrease gift card breakage, often considered a windfall for retailers. As a result, the lead plaintiff was required to purchase additional gift cards in order to use the balance; due to the pricing mechanisms in Google Play, the plaintiff was never able to use the entire balance of the combined gift cards. The additional purchases, as well as the forfeited balance, is the alleged injury causing harm to the plaintiff sufficient for the lawsuit.
Gift card issuers must be careful to comply with various state and federal gift card laws. Some states, like California, require that balances be refunded once they reach a certain threshold. Some states will require reporting unused gift card balances as unclaimed property, while other states exempt reporting the balances. Even among those that exempt the reporting of unused gift card balances, specific rules regarding fees, expiration dates, and disclosures must be followed to qualify for the state unclaimed property exemptions. Many of these issues can be prevented with proper planning and customized policies and procedures.