Retailers Must Provide Cash Back on Gift Cards With Balances Under $15 (Up From $10) or Face Potential Class Actions
Effective April 1, 2026, California Senate Bill 22 (SB 22) will now require businesses to provide cash back on gift cards with a balance under $15 (up from $10 under current law) upon a consumer’s request. Given the nearly twenty-year history of plaintiffs’ firms targeting retailers in class actions for failure to comply with California’s current gift card law, businesses should expect that the plaintiffs’ bar will be ready to test compliance with the new threshold shortly after the law takes effect. Retailers that issue or accept gift cards in California should review their policies and procedures now to limit potential exposure.
Why It Matters: A History of Litigation
The cash-redemption requirement in California’s gift card statute has resulted in nearly 200 lawsuits since the law took effect in 2008, making it the most actively litigated gift card law in the country.
While some of these lawsuits have hit businesses that were non-compliant or unaware of the cash-redemption requirement in California’s gift card law, what has been particularly frustrating for retailers is that often these businesses actually have compliant policies in place. But because it is so rare that consumers using gift cards ever ask for cash back, it is an exceedingly unusual request for a sales associate faced with such a request (even if the associate had that policy in his or her initial training). Oftentimes, these cases arise when an investigator for a plaintiffs’ attorney hits a bunch of stores at once (usually in a mall) armed with gift cards under the threshold amount, asks for cash back, and if the sales associate even responds simply with “I’m not sure we can do that,”—bingo—class action. These investigators will usually visit several of the retailer’s stores and keep notes of the names of the sales associates, along with verbatim quotes of what was said, in order to combat any potential defense of the retailer claiming that it had a compliant policy, but that particular sales associate did not follow it.
It is therefore incumbent on retailers with California stores who deal with gift cards to not only train sales associates about the gift card law, but also to frequently remind them about this requirement, and how noncompliance can result in the company being sued in a class action. It is also imperative that the stores train personnel on how to actually give the cash back, since oftentimes that is a barrier to compliance, even if a sales associate is attempting to comply.
While none of these cases have proceeded to trial, most matters result in settlement involving payment of an incentive fee to the named Plaintiff, attorney’s fees to Plaintiff’s counsel (in the tens of thousands, sometimes nearly up to six figures), and injunctive relief terms requiring compliance policies, training, and sometimes demands for auditing and subsequent reporting after the performance period. We have now increasingly seen the same Plaintiff’s attorneys sue the same businesses they previously settled with—claiming failure to follow the terms of the prior agreements, and once again seeking similar attorney fees. Meanwhile, these businesses also face the operational burden, business distraction, and payment of their own defense attorney fees. Suffice it to say, diligently following a compliant policy is a better way to avoid the expense and hassle of one of these “gotcha suits” in the first place.
While the original iteration of the amended law sought to raise the threshold of gift cards with a balance under $25, there were significant fraud concerns raised by businesses that such an increase could cause. Nevertheless, even the current increase from $10 to $15 will expand the scope of potential transactions subject to the cash-redemption requirement, while likewise increasing the exposure to potential litigation if those requests are not properly handled.
What Is New
The central change under SB 22 is the increase in the cash-redemption threshold from $10 to $15. The bill also makes two related adjustments: It expressly brings electronic gift cards within the scope of the statute, and it carves out an exception for gift certificates donated to nonprofits.
Higher cash-redemption threshold. Under current California law, businesses must redeem a gift card for cash if the remaining balance is less than $10 and the consumer requests cash. SB 22 raises that threshold to less than $15. Businesses that issue or accept gift cards in California must honor consumer requests for cash redemption at or below this new threshold. (Cal. Civ. Code § 1749.5(b), as amended by SB 22).
Electronic gift cards expressly covered. SB 22 clarifies that the statutory definition of “gift certificate” includes electronic gift cards and similar digital stored-value products, confirming that the cash-redemption requirement applies to both physical and electronic gift cards. (Cal. Civ. Code § 1749.45, as amended by SB 22).
New exception for donated gift certificates. SB 22 creates an exception for certain gift certificates donated to nonprofit or charitable organizations. Gift certificates issued as donations to nonprofits are not subject to the same cash-redemption requirement, provided the gift certificate has a disclaimer in at least 10-point font that the card is not redeemable for cash under California state law. (Cal. Civ. Code § 1749.5(c), as amended by SB 22).
What Remains the Same
Several existing requirements under California’s gift card law are unchanged by SB 22.
Expiration dates and fees. Gift cards generally may not include expiration dates, and dormancy, inactivity, and service fees remain prohibited except in limited circumstances specified in the statute. (Cal. Civ. Code §§ 1749.5(a), (e)–(f), (h)), as amended by SB 22).
Cash redemption only upon request. Cash redemption is required only when a consumer affirmatively requests it. Businesses are not required to automatically provide cash for qualifying balances—they are also not required to offer cash as an option if the balance is below $15.
No point-of-sale disclosure requirement. California law does not require businesses to provide point-of-sale or card disclosures informing consumers of the right to request cash redemption for small remaining balances.
What Businesses Should Do Now
With the April 1, 2026, effective date approaching, businesses that issue or accept gift cards in California should take the following steps to prepare for compliance:
- Update employee training materials and internal policies to ensure store personnel understand that gift card balances under $15 must be redeemed in cash upon request by the customer.
- Confirm that point-of-sale systems allow staff to process cash redemption requests for gift card balances below $15. Check to ensure that your registers actually permit cash to be returned—audit your system for compliance, and show your sales associates how to do it.
- While not required, some retailers have small notices that only face employees at the register reminding them of the requirement. Likewise, others have reminder notices posted in break rooms. We suggest having managers during routine meetings also remind employees of this policy, and why it is important, given that it can expose the company to lawsuits.
- Review consumer-facing gift card terms and customer service scripts to ensure they accurately reflect the updated $15 threshold.
For further guidance on what SB 22 means for your business, and best practices to both update and maintain compliance, please contact any member of Ballard’s Retail & E-Commerce Team.
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