Splitit Navigating New Norms June 2024 Banner

Consumer Group Aims to Close Quarter-Billion ‘Gift Card Loophole’

Starbucks gift card

A consumer group is campaigning to change Washington state’s 20-year-old gift card law.

As noted in a recent Ars Technica report, the Washington Consumer Protection Coalition (WCPC) wants to change a 2004 provision governing gift card balances.

That legislation barred gift cards from completely expiring, but also allowed companies to claim the money left on cards as revenue. The WCPC is proposing a change that would give those extra funds to the unclaimed property division of the Washington Department of Revenue.

However, the new law would also allow consumers to first cash out small amounts left on gift cards and require companies to notify customers about unspent funds before they are diverted.

According to the report, the reforms would exempt businesses with yearly revenues of under $25 million. Instead, it would target Washington-based giants like Starbucks — which the WCPC says has kept $894 million in unspent gift card revenue in the last five years — outdoor retailer REI and department store Nordstrom.

The report also includes a statement from the Washington Hospitality Association arguing that there “is no loophole in Washington law” involving gift cards. The association says the proposed legislation would make it harder for consumers to spend their gift card balances.

The situation in Washington is not universal. In many states, merchants are required to pay the value of unused gift cards back to the state, David Metz, founder and CEO of AdTech company Prizeout, told PYMNTS last year.

“It’s considered lost property,” said Metz. “It actually sits on a liability on the books for the merchant.”

The WCPC’s campaign comes on the heels of a holiday season in which gift cards were the second-most favored gift choice, with more than a third of shoppers saying they plan to purchase them, per recent PYMNTS Intelligence research.

The popularity of gift cards makes sense, PYMNTS wrote, “given the fact that we’re living in such an inflationary environment, and the cards themselves can boost a recipient’s spending power at a favored store or site.”

And earlier last year, PYMNTS examined the advantages of digital gift cards over their plastic counterparts.

“Often, recipients stow away these cards in their wallets or purses, unintentionally overlooking them amidst the accumulation of their belongings over time, resulting in these once-considerate gifts going untouched,” that report said. “Expiration dates on specific gift cards only worsen the situation, placing recipients at risk of forfeiting the card’s value.”