December 9, 2022

Volume XII, Number 343

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Texas Gift Card Law Amended—New Cash Redemption Requirements

Background

Several states have laws that require retailers to provide a cash redemption on gift cards that fall below a certain balance. These laws have been the source of class action and government enforcement over the past several years. For example, retailers in California faced government inquiries and dozens of class action filings alleging noncompliance after a similar cash redemption requirement was added to the California gift card law in 2008.

The New Texas Gift Card Rules

Effective September 1, 2015, retailers in Texas will be required to provide, at customer request, a cash redemption on gift cards that have a value of less than $2.50. The law only applies to gift cards used to make in-person purchases (i.e., not online). The cash redemption requirement will not apply to certain gift cards, including

(a) cards with an initial value of $5 or less to which additional value cannot be added,

(b) cards distributed as a refund for non-receipted returns,

(c) cards distributed as part of an awards, loyalty, rebate, or other promotional program (i.e. distributed without cost to the consumer), and

(d) prepaid calling cards.

Practical Implications

Retailers should prepare to implement cash redemption procedures for store locations in Texas. Retailers should take particular care to

(1) make sure they have a process in place that allows cashiers to provide cash redemptions when requested,

(2) revise internal policies and procedures to allow for cash redemptions,

(3) consider revision of terms and conditions or other public disclosures regarding gift cards to note the availability of a cash redemption, and

(4) properly train cashiers regarding the need to provide cash redemptions upon customer request.

Although Texas’s gift card law specifically provides that it does not create a cause of action against the issuer or seller of gift cards, that fact likely will not prevent plaintiffs’ lawyers from finding creative (albeit meritless) ways to bring lawsuits in the retail space.

Copyright © 2022 by Morgan, Lewis & Bockius LLP. All Rights Reserved.National Law Review, Volume V, Number 215
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About this Author

Gregory Parks, privacy and cybersecurity lawyer, Morgan Lewis
Partner

Gregory T. Parks counsels and defends retail companies and other consumer facing clients in matters related to privacy and cybersecurity, class actions and Attorney General actions, consumer protection laws, loyalty and gift card programs, retail operations, payment mechanisms, product liability, waste management, shoplifting prevention, compliance, antitrust, and commercial disputes. If it is important to a retail company, Greg makes it his business to know it. He handles all phases of litigation, trial, and appeal work arising from these and other areas. Greg is the co...

215-963-5170
Anne Marie Estevez, labor and employment lawyer, Morgan Lewis
Partner

Anne Marie Estevez defends clients in complex, class, and collective action employment, Americans with Disabilities Act (ADA), public accessibility, and consumer class action cases in US federal and state court. Fluent in Spanish, she represents a broad range of US and international clients in employment and labor-based cases nationally, from wage and hour to discrimination to trade secrets litigation. Anne Marie also counsels employers nationally in these areas, negotiates high-level executive contracts and terminations, and handles due diligence for complex employment...

305.415.3330
Christina Edling Melendi, Morgan Lewis, Securities lawyer
Partner

Christina Melendi’s corporate and securities practice focuses on representing public and private corporations and private equity sponsors and their portfolio companies in mergers and acquisitions, asset purchases, joint ventures, private and public equity and debt financings, securities offerings, and other general corporate matters. Christina also assists companies to raise capital in the public markets, including initial public offerings and secondary offerings. Christina counsels clients on SEC reporting and securities law disclosure, annual meeting and proxy related...

212.309.6949
Ezra Church, Litigation Lawyer, Morgan Lewis
Partner

Ezra D. Church focuses his practice on class action lawsuits and complex commercial and product-related litigation, with particular emphasis on the unique issues facing retail, ecommerce, and other consumer-facing companies. Ezra also focuses on privacy and data security matters, and regularly advises and represents clients in connection with these issues.

215.963.5710
Joseph Duffy, litigation attorney, Morgan Lewis
Partner

A nationally recognized litigator, Joseph Duffy defends class actions in US federal and state courts. As co-head of the litigation practice’s Retail Industry Initiative, he focuses on the unique challenges facing retail companies, representing retailers in consumer class actions, contract disputes, and compliance and privacy matters. He also litigates class actions for financial services companies involving lending practices, foreclosure activity, and debt collection. Joseph earned recognition as a Class Actions and Mass Torts “Powerhouse” in BTI’s Litigation Outlook...

213-612-7378
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