Should rules around gift cards be relaxed in Washington state, or is that a recipe for fraud?

Retailers are speaking out against proposed changes to gift card laws in Washington state as the 2024 legislative session gets underway in Olympia.

One bill under consideration would allow consumers to cash out their gift cards if there’s a $50 balance or less. Right now, the threshold is $5.

Crystal Leatherman of the Washington Retail Association told a Senate committee the proposal would make businesses vulnerable to crime.

“This change places a burden on retailers, both large and small, to maintain significant cash on hand, which then exposes their employees and customers to dangerous situations,” Leatherman said.

Katie Beeson, with the Washington Food Industry Association, said the change would add incentive for people to use gift cards to launder money.

“Retailers have a higher risk of gift card frauds and gift cards become a bigger target for money laundering,” she said.

The bill would also allow consumers to use gift cards with other forms of payments to make a purchase.

Consumer advocates say the last time the state created policy on unused gift cards was in 2004. At the time, unspent balances represented $3 million a year. But now those unused balances have increased to hundreds of million of dollars.

State Sen. Yasmin Trudeau (D-Tacoma), a bill sponsor, said because current law allows retailers to limit how gift cards are used, cards with small balances are often discarded or left to gather dust in people's drawers.

“If I can take $5 left on this gift card and $25 of my own money to buy something that’s $30, why wouldn’t that be allowed?” Trudeau asked.

It’s estimated that Americans spent nearly $30 billion in gift cards this past holiday season.

Increasingly, gift cards are no longer just a token of appreciation, but a way to help people. Michele Thomas, with the Low Income Housing Alliance, said her organization provides gift cards to members in need.

"Our members are people for whom even $5 can make a difference between paying a bill on time or eating a full meal that night," Thomas said.