The holiday season is upon us. For many retailers, that means gift card sales are about to explode, which is great news. Not only can gift card sales help generate new customers, but industry data continues to confirm that consumers often never use some portion of their gift card balance, which can ultimately result in additional breakage profit.
Be warned, however, that a new type of class action lawsuit against retailers is starting to emerge relating to the very fact that, for whatever reason, consumers may not always want to use the entire balance of their gift cards on merchandise. California has enacted legislation requiring retailers to honor consumer requests for “cash back” any time a gift card’s balance falls below $10, and similar legislation is pending in Connecticut. Other states such as Colorado, Maine, Massachusetts, New Jersey, Oregon and Washington have the same or similar requirements for balances below $5. Texas has a similar requirement for balances below $2.50. Rhode Island and Vermont have a similar requirement for balances below $1.
Class action plaintiffs’ attorneys have taken note, and a rash of “cash back” lawsuits have popped up claiming that retailers are failing to comply with these requirements. For example, based on these “cash back” requirements, separate class action lawsuits have been filed against Google (based on Google Play gift cards), Dave & Buster’s, Lowe’s, Kiehl’s and Toys “R” Us, all alleging violations of state “cash back” gift card statutes and seeking significant damages.
So if you are selling gift cards this holiday season, make sure you know whether the states you operate in have a “cash back” requirement and how you can comply. Otherwise, Santa might put you on the naughty list, and you could end up with a class action lawsuit in your stocking to go along with that dreaded piece of coal.