REI Dividend Gift Cards Early Expiration EFTA, Washington Class Action

An amendment to the Electronic Funds Transfer Act (EFTA) aims to protect the value of gift cards offered by retailers. The complaint for this class action alleges that Recreational Equipment, Inc. (REI) violates EFTA and the state of Washington’s unfair business practices laws because of the early expiration dates on its gift cards.

The class for this action is all persons in the US to whom REI issued a member dividend in the form of a gift card and whose gift card expired, during the statute of limitations period.

Congress passed EFTA in 1978. In 2009, it amended the act with the Credit Card Accountability, Responsibility and Disclosure (CARD) Act to protect consumers’ gift card purchases. Under this amended EFTA, businesses may not issue gift cards with an expiration date earlier than five years after the card was issued or last reloaded.

Washington state laws are even stricter. The gift card expiration law forbids “acts and practices of retailers that deprive consumers of the full value of gift [cards], such as expiration dates….” The complaint says, “Accordingly, imposing expiration dates on gift cards is a per se unfair business practice.”

REI issues an interesting type of gift cards. The company claims to be a cooperative owned by its members. The general public can buy memberships for a fee. As part of its business model, REI issues dividends to its members each year, representing a portion of its profits. The dividend is a percentage of the amount the member spent at REI the previous year. (No dividends are issued to members who did not buy anything at REI in the previous year.)

The dividend is given to members in the form of a gift card in both paper and electronic form. They are issued for a specific amount and can be used only at REI. The complaint claims they are not for loyalty, reward, or promotional purposes. 

Unfortunately, the cards expire in less than five years. Each January, on a single day, all gift cards issued two years before expires. 

Plaintiffs Jourey Newell and Felipe Machado are REI members. Both bought items in 2016 that entitled them to dividends in 2017. REI issued the dividends in the form of gift cards in 2017. Both men’s gift cards expired in early 2019. This expiration is well before the five years required by EFTA and seems to violate Washington state laws as well. 

Article Type: Lawsuit
Topic: Consumer
Tags: Deceptive Business Practices, Gift Cards, Loss of credits or gift card benefits