SB22 rewrites California’s rules for gift certificates by removing common ways value is lost: the bill bars sales of gift certificates that impose expiration dates or service fees (with a tightly defined dormancy-fee exception) and requires certain certificates to be redeemable in cash or replaced at no charge. It also creates disclosure rules and narrow exemptions for promotional programs, perishable goods, and volume-discount sales to employers or nonprofits.
The change matters for retailers, third‑party issuers, payroll and benefits vendors, and nonprofits that handle donated certificates. Issuers will have to review pricing, card packaging, and system rules for balances and inactivity; state regulators and treasury offices will need to reconcile this regime with unclaimed‑property (escheat) rules and enforcement practices.
At a Glance
What It Does
The bill requires many gift certificates to be cash‑redeemable or replaced free of charge and makes it unlawful to sell certificates with expiration dates or service fees, except for a narrowly defined dormancy fee. It also enumerates limited exemptions (promotional, perishables, short‑term fundraising sales) and prescribes on‑card disclosure requirements for certain features.
Who It Affects
Retailers and brands that issue or sell gift certificates, third‑party gift‑card processors, employers/nonprofits buying discounted packs, and payment vendors that handle balances and reloads. Consumers who hold low‑value balances and contributors who pool funds for a recipient are directly affected by new refund and redemption rules.
Why It Matters
This is a practical consumer‑protection rewrite: it removes common expiration and fee traps, forces clearer on‑card disclosures, and constrains dormancy charges — all of which will change how merchants structure promotions and how processors implement inactivity rules.
More articles like this one.
A weekly email with all the latest developments on this topic.
What This Bill Actually Does
SB22 tightens rules to prevent gift certificate value from disappearing without clear notice or recourse. For certificates covered by the law, holders must be allowed to get cash for the card’s value or receive a free replacement certificate; the bill also prevents sellers from putting expiration dates or routine service fees on certificates except in the one narrowly defined dormancy situation.
The upshot is that issuers can no longer rely on expirations or straightforward monthly fees to recapture small leftover balances.
The bill builds a set of narrow carve‑outs and disclosure obligations. Certain distribution types — like promotional awards or perishable‑food certificates — can carry expirations if the date is prominently printed in capital letters at a minimum readable size.
Dormancy fees are not banned outright, but the statute limits when they can be charged, what the fee can be, and requires the fee terms to be visible to buyers before purchase. The measure also governs pooled contributions: if several people chip in to buy a certificate for someone else, the issuer must refund contributors if the recipient doesn’t redeem within the disclosed timeframe.Operationally, the law touches product design and account rules.
Issuers must adjust card stock and packaging to include required statements, change back‑end logic that imposes inactivity or service fees, and create refund pathways for contributors. It also clarifies acceptable settlement methods: cash includes checks and, if both parties agree, certain electronic transfers or balance applications to accounts (for example, a wireless subscriber account).
Finally, the statute staggers applicability by issue date and sets an operative start date, giving vendors a definable compliance window to update systems and inventory.
The Five Things You Need to Know
SB22 becomes operative April 1, 2026, and its prohibitions and the dormancy‑fee exemption apply only to gift certificates issued on or after January 1, 2004.
The bill requires cash redemption or free replacement for qualifying gift certificates and separately mandates cash redemption for any certificate with a face value under $15.
A dormancy fee is permitted only if each assessment occurs when the remaining balance is $5 or less, the fee is no more than $1 per month, inactivity has lasted at least 24 consecutive months, the card can be reloaded, and the fee is disclosed in at least 10‑point type visible to purchasers.
Certain exemptions allow expirations when the expiration date is printed in capital letters in at least 10‑point font on the front of the certificate; covered exemptions include promotional/loyalty distributions, short‑term discounted fundraising sales, and perishable food certificates.
When contributors pool funds to buy a gift certificate, the issuer must provide contributors a full refund if (1) the funds were contributed to let the recipient buy a certificate, (2) the redemption window was disclosed in writing, and (3) the recipient fails to redeem within that window.
Section-by-Section Breakdown
Every bill we cover gets an analysis of its key sections.
Prohibition on expirations and service fees
This provision makes it unlawful to sell a gift certificate that contains an expiration date or a service fee (explicitly including dormancy fees), subject to the single dormancy exception spelled out later. Practically, sellers must remove any printed expiration and stop contractual or system rules that deduct standing service charges at sale. Compliance requires reviewing point‑of‑sale materials, packaging, and backend billing logic to avoid inadvertent violations.
Cash redemption and replacement obligations
This section creates the core consumer remedy: certificates sold after the baseline date must be redeemable for cash (or replaced with a new certificate at no charge). It also separately guarantees cash redemption for certificates with low face value below a specified dollar threshold. Issuers will need procedures to handle cash‑out requests and policies to prevent fraud or double‑redemption when converting outstanding card balances to currency or checks.
Nonprofit donation disclaimer carve‑out
If a certificate is donated to a nonprofit without consideration, the statute allows the card to be nonredeemable for cash provided it carries a clear disclaimer in at least 10‑point font stating it is not redeemable under California law. Organizations soliciting donated certificates must ensure the notice is legible and that donors understand the noncashable condition, or the nonprofit risks being on the hook for cash redemption.
Limited exemptions where expirations are allowed
The bill lists three narrow categories that can carry expirations if the date is printed conspicuously on the front in capital letters and minimum type size: loyalty/promotional awards distributed without consideration, volume‑discount fundraising sales with expirations no more than 30 days after sale, and gift certificates for perishable food products. This creates a clear pathway for common promotional mechanics while forcing issuers to display the restriction prominently to protect consumers.
Dormancy fee — a tightly constrained exception
Dormancy fees are allowed only under multiple cumulative conditions: each fee applies when the remaining balance is $5 or less; the monthly fee cannot exceed $1; there must have been 24 months of no activity; the card must be reloadable; and the fee’s terms must appear in an on‑card statement in at least 10‑point type visible to purchasers. Together, these constraints aim to permit a narrow administrative fee for de minimis balances while blocking routine balance erosion.
Contributor refunds for pooled purchases
The statute permits issuers to accept multiple contributors toward a gift certificate but requires full refunds to contributors if the recipient doesn’t redeem within a disclosed timeframe. The issuer must disclose the redemption period in writing to contributors and the intended recipient before taking funds. Implementing this requires tracking pooled funds, disclosure records, and a refund mechanism tied to the disclosed deadline.
Application dates, definitions, and operative date
The bill limits the retroactive reach of a few provisions by tying the prohibition and the dormancy‑fee exception to certificates issued on or after a specified baseline year, defines cash to include checks and permissible electronic transfers, and sets the law’s operative date. These temporal provisions give issuers a clear compliance horizon and affect which outstanding inventory or programs must be altered.
This bill is one of many.
Codify tracks hundreds of bills on Finance across all five countries.
Explore Finance in Codify Search →Who Benefits and Who Bears the Cost
Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- Consumers holding small or forgotten balances — the law expands real options to recover low‑value funds or to get replacement value rather than letting balances vanish.
- Recipients of pooled gifts — contributors must be refunded if the recipient fails to redeem within the disclosed period, reducing the risk of lost pooled funds.
- Shoppers receiving promotional or purchased certificates — clearer, on‑card disclosures and limits on hidden fees reduce surprise forfeiture and make value comparisons easier.
Who Bears the Cost
- Retailers and brands issuing certificates — they must change card language, packaging, point‑of‑sale flows, and backend accounting; small merchants may face nontrivial reprogramming and inventory write‑downs.
- Third‑party card processors and payment vendors — these providers will need to revise inactivity logic, redemption flows, and refund processes for pooled contributions, incurring development and operational expenses.
- Fundraising organizations and employers who buy discounted bundles — where expirations were used to manage breakage, buyers may pay more or change fundraising mechanics to avoid holding open liabilities.
Key Issues
The Core Tension
The central dilemma is consumer protection versus operational and cost burden: the bill protects cardholders from losing stored value to expirations and hidden fees but forces issuers, especially small merchants and third‑party processors, to overhaul product designs, disclosures, and accounting practices — and to absorb or pass on those costs, which may reduce promotional flexibility or raise consumer prices.
Implementation will raise practical questions that the statute does not fully resolve. First, the line between a “gift certificate” and other stored‑value instruments (closed‑loop vs. open‑loop cards, digital wallets, subscription credits) can be blurry; issuers will need legal analysis to determine which products fall under the law and which remain subject to different rules.
Second, the bill’s interaction with state unclaimed‑property (escheat) regimes is awkward: making cards redeemable for cash reduces the pool of dormant liabilities turning up in state escheat rolls, but it does not harmonize reporting obligations or timelines, which may leave treasuries and issuers scrambling to align operational workflows.
Enforcement and consumer‑notification burdens are another tension. The statute’s formatting and conspicuousness requirements (capital letters, minimum type size) are straightforward on plastic stock but harder to enforce for e‑cards, email notifications, or apps.
The contributor‑refund rule creates recordkeeping and refund liabilities that could be exploited by opportunistic claimants if issuers do not require robust proof of contribution and disclosure receipt. Finally, while the dormancy fee exception is narrowly drawn, its cumulative conditions (balance cap, fee cap, inactivity period, reloadability, and disclosure) create a compliance checklist that will be administratively demanding for smaller operators.
Try it yourself.
Ask a question in plain English, or pick a topic below. Results in seconds.