Whether it is a distant cousin, a picky aunt, or an impossible to shop for teenager a gift card is a great option for giving during the holiday season. For this reason many of our small business clients love to offer them to their clients as a quick and easy way to boost sales at the end of the year. It is important to remember though that while gift cards can be issued by almost any business, Connecticut law provides specific restrictions on the terms of gift cards sold in the state. Overall Connecticut has sought to strike a balance between allowing businesses to meet consumer demand for gift cards and protecting those same consumers in those purchases.
Expiration Dates and Dormancy Fees
The most significant of these restrictions is that gift cards in Connecticut cannot expire pursuant to Conn. Gen. Stat. § 42-460, so a gift card sold in Connecticut must be honored from the time it is issued until the value of the card is used. Other states do not impose this restriction on gift cards and it can be a welcome surprise for new Connecticut residents.
Another significant restriction is that gift cards in Connecticut cannot impose “inactivity fees” or other types of fees that slowly reduce the value of the card if it is not used for a period of time under Conn. Gen. Stat. § 3-65c. This means that gift cards in Connecticut cannot expire and their value cannot be reduced except when used by the customer. Once again this is not the law in every state so businesses selling gift cards in multiple states must be careful to comply with the Connecticut specific rules if they are selling here.
Going out of Business
One of the few times a businesses may dishonor gift cards is when they are closing their doors for good or undergoing certain types of bankruptcy. Connecticut law does not create a duty for retailers to honor gift certificates after their business enters bankruptcy. One of the few states that has such a law is California (Cal. Civ. Code § 1749.6(b)).
This does not mean that businesses that are shutting down are free to do whatever they like with gift cards as other laws, like the Connecticut Unfair Trade Practices Act (Conn. Gen. Stat. § 42-110), which allows consumers and the Attorney General’s Office to sue businesses for conduct which is deemed unfair or deceptive, may still apply. For example it could be construed as an unfair trade practice for a business owner to sell gift cards knowing that he planned to shut down the business at the end of the month and knowing that the gift cards were not likely to be used before then. Connecticut courts can award punitive damages and attorney’s fees to prevailing consumers in addition to the amount they paid in an unfair transaction.