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Friday, February 23, 2024
Feb. 23, 2024

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How gift card rules in WA could change

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OLYMPIA — In purses, wallets and drawers across the country, gift cards are languishing unspent.

Starbucks alone claimed $215 million in unspent gift cards as revenue in the 2023 fiscal year, according to its annual report to the U.S. Securities and Exchange Commission.

Advocates and some lawmakers want to change Washington state’s laws to make gift cards more consumer-friendly and to require that, after three years, unspent gift cards be transferred to the state as unclaimed property. The change could affect major companies based in Washington, like Starbucks and Nordstrom.

Under the proposals, consumers could still seek back that money from the state, but, if it goes unclaimed, it could also be used by the state to pay for public services. (A customer could also still use a gift card after three years because the state would reimburse the company.)

Misha Werschkul, executive director of the Washington State Budget and Policy Center, one of the groups supporting the proposals, said Washington companies have an incentive under current law to make it harder for consumers to use gift cards.

“If there is money that’s left unspent for a Washington state company right now, that money goes back to the company and they don’t have to provide a service,” Werschkul said. “And so the incentives are out of alignment with what’s best for consumers.”

The proposals, sponsored by state Sen. Yasmin Trudeau, D-Tacoma, and state Rep. Emily Alvarado, D-Seattle, would also put more safeguards around gift cards.

For instance, they would require companies to let people cash out gift card balances under $50 and let customers with low gift card balances combine that balance with another form of payment, like cash. And companies could not require a minimum dollar amount to reload a gift card.

More than 70% of Fortune 500 companies, including Amazon and Walmart, transfer unspent gift card funds to the states where they’re incorporated to state unclaimed property programs. (Amazon is incorporated in Delaware.) But Washington companies don’t have to do that.

Unclaimed property programs maintain money in the possession of an entity that has lost contact with the owner for a long time — say, a bank account, or a deposit paid to a utility company.

In Washington, the program is run by the state Department of Revenue. In 2022, holders of unclaimed property reported about $246 million to the state of Washington, and consumers collected back $89 million.

Under the proposed legislation, Washington companies would be required to notify the customer when transferring $50 or more in unclaimed property to the state. But a customer could still spend the gift card at the retailer after that — if so, the state would reimburse the company for that purchase.

Companies with annual revenue below $25 million would be exempt from the requirement to transfer unspent gift card money to the state.

Proponents estimate the proposals could bring in $2.5 billion in new revenues to the state over a decade, or about $250 million per year.

“Frankly, every time we go to Olympia and ask for programs and services that help low-income people meet their basic needs, we are often told it’s all about whether the state has enough money,” said Marcy Bowers, executive director of the Statewide Poverty Action Network. “And having a revenue source that is pretty common in other states seems kind of like a no-brainer to me.”

The package of legislation, if passed, could have a significant effect on Starbucks, one of the state’s largest companies, which sells billions in gift cards annually. Customers can earn twice as many rewards for using gift cards to pay for purchases through the company’s mobile app.

According to advocates, Starbucks has claimed about $894 million in unspent gift cards as corporate revenue in the last five years.

Public relations representatives for Starbucks, REI and Nordstrom did not respond to requests for comment.

Costco, which is based in Washington, would not be required to transfer its unspent gift cards because the proposal would exempt gift cards sold by companies where customers have to spend at least $50 on an annual membership. Member companies have “a direct and ongoing relationship” with the customer, according to the coalition of supporters, because they can more easily return the money to a customer.

The upcoming legislative session begins in early January and is scheduled to last 60 days.

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