Unused Balances on Gift Cards are Big Business for Small Business

June 4, 2010 - An estimated $5 billion in cash was left unused on gift cards in 2009. Groups that get to hold on to that money were able to beat back a provision that would have allowed consumers to put more of that cash into their pockets.

Back in 2007, the state passed a law sponsored by State Senator Ellen Corbett that allowed consumers to receive cash for the value left on gift cards if the balance is less than $10. Earlier this year Corbett introduced a new bill that proposed to: raise the allowable redemption amount to $20; require that the card itself state that it can redeemed for cash—in at least a 10-point font; and eliminate "dormancy" fees that the card issuers are allowed to impose if a card is left unused for a period of time.

On the Senate floor last week, an amendment weakened the bill significantly—reducing the $20 amount back to the $10 that is currently in law—while retaining the other provisions. The Senate passed the bill yesterday 21-12.

Four trade associations that represent small businesses that issue gift cards—the California Chamber of Commerce, the California Restaurant Association, the California Retailers Association, and the National Federation of Independent Business—have opposed the bill, largely on grounds that it will hurt small businesses, and have lobbied on this bill according to their most recent lobbying disclosure reports.

The three moderate Democrats opposing the bill in the June 3 floor vote—Ron Calderon, Gloria Negrete McLeod and Rod Wright—received an average of $14,555 in campaign contributions from opposing trade associations over the past four years; 51% more than $9,629 received by the nine Republicans opposing the bill and seven times as much as the 20 Democrats and one Republican that voted yes ($1,956). Two Democrats did not vote: Lou Correa, the largest recipient of campaign money from these four trade associations ($22,630) and Alex Padilla, a top-ten recipient ($11,128).

Methodology: Campaign contributions data provided by the National Institute on Money in State Politics (NIMSP), and includes state Senate and Assembly campaign contributions from the California Chamber of Commerce, the California Restaurant Association, the California Retailers Association, and the National Federation of Independent Business. Date range of campaign contributions to current Senators is the last four years for which we have data (March 18, 2006 - March 17, 2010) coded by NIMSP as of April 29, 2010. Votes on SB 885 are recorded in the Office of Legislative Counsel's LegInfo database.