California Raises Gift Card Cash-Out Threshold to $15

Effective April 1, 2026, California will increase its mandatory gift card cash-out threshold from $10 to $15, requiring retailers to provide cash refunds for gift card balances under $15 upon request. The amendment, enacted through California Senate Bill 22, expands compliance obligations for businesses offering gift cards in the state. This LawFlash outlines the statutory changes, compliance challenges, enforcement trends, and practical steps companies should take to prepare.

KEY TAKEAWAYS

• California will require cash redemption of gift card balances below $15 starting April 1[1]
• The new threshold applies to both physical and electronic gift cards purchased for value, with exceptions for promotional gift cards
• Companies must update their policies, point-of-sale systems, and staff training to ensure compliance before the effective date
• Noncompliance risks significant regulatory enforcement and private litigation exposure, including in class actions

BACKGROUND

California Civil Code Section 1749.5 has long governed the sale and redemption of gift certificates, including prohibiting expiration dates and service fees (with limited exceptions) and requiring cash refunds for small balances. Since 2008, the threshold for mandatory cash redemption was set at $10.

On April 1, the threshold will increase to $15, making California’s requirement the highest in the nation and expanding both the scope and compliance obligations for businesses. This change comes amid significant consumer interest in unused gift card balances, which reportedly total up to $27 billion nationally.

KEY PROVISIONS AND SCOPE OF THE AMENDED LAW

California Senate Bill 22 amends Civil Code Section 1749.5 to require that “a gift certificate with a cash value of less than fifteen dollars ($15) is redeemable in cash for its cash value.” The law applies broadly to both physical and electronic gift cards sold for use in California, expanding the statutory definition of “gift certificate” to include “electronic gift cards.” Key provisions include:

• No expiration or service fees, with narrow exceptions: Gift certificates generally may not contain expiration dates or service fees, except in narrow circumstances, such as certain promotional or loyalty cards, or certificates for perishable food
• Cash redemption requirement: Any gift card with a remaining balance under $15 must be redeemable for cash at the holder’s request; “cash” is defined broadly to include currency, check, or, if both parties agree, electronic funds transfer or wireless account credit
• Applicability and coverage: The law covers retailers, restaurants, and other businesses offering gift cards in California, with limited exceptions based on how and for what purpose the card is issued

ENFORCEMENT TRENDS AND LITIGATION RISKS

California district attorneys have actively enforced gift card cash-out laws, often coordinating across counties. In October 2025, Chipotle Mexican Grill settled allegations of noncompliance by paying $246,000 in civil penalties, restitution, and costs, and agreed to operational changes, including a dedicated online portal for cash-out requests and enhanced consumer disclosures. Such enforcement actions underscore the risk of regulatory scrutiny and the need for robust compliance systems.

In addition, class action litigation alleging violations of the gift card law has been brought by plaintiffs’ attorneys in both state and federal courts. Noncompliance can thus result in liability from both government enforcement and private lawsuits.

COMMON COMPLIANCE PITFALLS

Businesses may encounter compliance risks in several areas as the new threshold takes effect:

• Outdated policies: Written policies and terms referencing the previous $10 threshold must be updated
• Employee training: Front-line staff may lack training or clear guidance on the new cash-out process
• Point-of-sale system limitations: POS systems may not be configured to handle cash refunds for balances under $15, especially for electronic gift cards
• Unclear cash-out procedures: Electronic gift card programs in particular may lack accessible mechanisms for consumers to request cash redemption
• Conflicting terms and disclosures: Terms and conditions printed on cards or posted online may not reflect the new requirements, increasing litigation risk

Even well-intentioned gift card programs can result in legal exposure if consumers’ rights to cash redemption are not clearly communicated and made easily accessible.

IMPLICATIONS AND RECOMMENDATIONS

The increase in the cash-out threshold to $15 is expected to significantly expand the number of gift cards eligible for cash redemption, particularly given the volume of cards in circulation and the prevalence of small unused balances. For companies with large customer bases or high gift card volume, the aggregate financial impact of refunding small balances could be substantial. Businesses should consider the following general steps to prepare for compliance:

• Review and update policies: Companies should update written policies, terms and conditions, and consumer disclosures to reflect the new $15 threshold
• Enhance employee training: Training programs for staff—especially those handling gift card transactions—should be refreshed to ensure consistent handling of cash-out requests
• Upgrade POS systems: Companies should review and, if necessary, update point-of-sale and e-commerce systems to allow for compliant cash refunds, including for electronic gift cards
• Audit cash-out mechanisms: Businesses should ensure that both in-store and online programs provide clear, accessible methods for consumers to request cash redemption
• Monitor for regulatory and litigation risk: Ongoing monitoring for regulatory updates, enforcement actions, and potential class action litigation is advised, as both state regulators and private plaintiffs are expected to scrutinize compliance following the statutory change
• Review statutory exceptions carefully: Because the law contains narrow exceptions, companies should evaluate whether any of their programs qualify and ensure all required disclosures are provided in the prescribed manner

Companies with operations in multiple states should also be aware of the “patchwork of similar but varying requirements” across jurisdictions, as California’s new $15 threshold is now the highest in the nation and may require additional state-specific compliance measures.

CONCLUSION

California’s increase of the gift card cash-out threshold to $15 represents a significant change in consumer protection law and creates new compliance obligations for businesses issuing gift cards in the state.

Companies should act now to update their policies, systems, and training—and to communicate consumers’ rights clearly—to avoid enforcement actions and litigation. With regulatory scrutiny likely to intensify, robust compliance preparation will be essential in the months leading up to the effective date.

HOW WE CAN HELP

Our retail team stands ready to advise companies on gift card compliance, consumer protection laws, and multistate regulatory requirements. We work with clients to assess program terms, update policies and systems, and address enforcement and litigation risks.