Both merchants and card holders should know state laws when it comes to how they can use cards. Gift cards, in particular, hold a unique place in Colorado law.
Since 2010 there have been several restrictions specific to Colorado about how merchants can handle long-since issued gift cards. Our Colorado State statute 6-1-722 states that;
- When a merchant issues a gift card there can be no inactivity, dormancy, maintenance, or service fee attached to the card. These fees are legal in many states. They encourage card holders to use the full balance on the card before too long.
- If the balance on a gift card is less than $5, the gift card holder can redeem it for cash. Although this is not a substantial amount in the eyes of gift card holders, they should be thankful. There are only 12 states that have this redemption law. California, for example, allows redemption of cards with less than $10. Connecticut’s gift card redemption law requires a balance of less than $3.
- Gift certificates that are good for cash (as opposed to specific food, goods, products or services) are subject to collection by the government after 5 years of abandonment. As a holder, it is useful to know that you should use that gift card at least once within a 5 year span.
As a business owner, you must know that most things are not just this simple. There are federal, not just state laws that play a part in gift card use.
- The federal gift card laws require that gift cards cannot expire less than 5 years after activation.
- The gift card should display the expiration date, if any.
- When the gift card expires, the holder does have the right to request a replacement. In Colorado, the gift card holder may just request a replacement, use all but $5, then ask for the cash back.
- Where Colorado law simply says that it is unlawful to have fees attached to gift cards, federal law states that this is only unlawful if the fee is charged within the first year of activation.
- The card issuer is allowed to charge only 1 of those fees per month.
What is an Open and Closed-Loop Card?
Although the Colorado gift card laws listed above are exclusive to closed-loop cards, the federal regulations could include open-loop exceptions. A closed-loop card is one that can only be used at the location or chain that distributed the card. Alternatively, open-loop cards are those that can be used at many locations. You can consider Visa or MasterCard prepaid cards when thinking “open-loop”.
Merchant or card holder, gift cards probably play an active role in your life and you should know the Colorado gift card laws surrounding them. For more information on card laws that you should definitely know, read our surcharge or Visa and MasterCard settlement blogs too!
Thank you for the info. Curious about prepaid services such as a series of laser hair removal at a spa. Paid upfront and not used completely. And in this case partially because of Covid shut down and very poor customer service. It’s been less than five years since they were purchased three radiators then we got shut down. And now they’re telling me it’s expired so several hundred dollars wasted for the ones I used as well as several hundred dollars they’re saying they don’t have to give me back as a credit or anything..
I guess the question is do the card gift certificate laws apply to prepaid services. They also refused to give me a copy of the agreement because it was all done digital in their office and I didn’t get a copy. Only thing I can do was show proof of payment. Any info would be helpful thank you!
I wouldn’t assume that gift card laws automatically apply to pre-paid services, but you may need to consult with an attorney for the answer to that. If the business is closed down, then you’re probably out of luck. However, if the business is still open, then it might depend on your method of payment. If you paid via debit/credit card, you can contact your bank and request to dispute the charge for pre-paid services if the services were never received. If you originally paid by check or cash and you can’t receive services from the business, then you may need consider taking them to small-claims court.
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