• Massachusetts Shifts Balance on Keeping Gift Certificate Funds
  • July 31, 2003 | Author: John P. Morgan
  • Law Firm: Perkins Coie LLP - Seattle Office
  • On January 1, 2003, Massachusetts enacted House Bill 216 into law which dramatically changes how companies issues gift certificates or gift cards. Under prior Massachusetts law, gift certificates were subject to the Massachusetts abandoned property law, Mass. Gen. Laws Chpt. 200A, and were deemed abandoned after three years. Gift certificates did not expressly include stored value cards. A separate statute, Section 75C of Mass. Gen. Laws Chpt. 75C, prohibited gift certificates from having an expiration date less than two years from issuance and required that any expiration date be printed on the face of the certificate.

    House Bill 216 has substantially modified the prior law. Specifically, it has made the following changes:

    • The definition of gift certificates now expressly includes "electronic cards" whether denominated in money or merchandise credits.

    • Gift certificates are no longer considered intangible "property" under the abandoned property law and are no longer presumed abandoned after three years.

    • A new Section 5D has been added to the abandoned property law to specifically address gift certificates. This section provides that all gift certificates must be valid for seven years from the date of issuance. According to a press release, the State Treasurer views this provision as prohibiting any dormancy or service fees.

    • The date of issuance and the date of expiration must be clearly marked on the face of the gift certificate. Any gift certificate not marked with an expiration date shall be redeemable in perpetuity.

    • Once a gift certificate has been redeemed for up to 90 percent of its value, a consumer is permitted to elect between taking the cash balance or keeping the value on the gift certificate.

    • Any imposition of an expiration date before the statutory seven year period is subject to a $300 fine. Any refusal to redeem a gift certificate before the expiration date is subject to a $300 fine.

    • A gift certificate that has been issued but not redeemed as of the effective date of House Bill 216, shall expire seven years after the gift certificate's date of issuance. If the date of issuance is not clearly marked on its face, the gift certificate shall be redeemable in perpetuity.

    Companies that issue gift certificates will immediately feel the impact of this law. Issuers will need to evaluate whether their gift certificate program is compliant with this new law both for outstanding certificates and for those issued after January 1, 2003. Issuers also will need to assess the lawfulness and sufficiency of any language on the face of their gift certificates.