Starbucks and Dunkin’ have both been named in what could become class-action lawsuits over gift cards

Maybe you lose your mind every year for Starbucks’ pumpkin spice lattes, but you’re also on a tight budget, so Aunt Gretchen generously bought you a gift card. But what happens when the card balance gets down to $3.50, but a grande hot PSL costs up to $5.95?

• One option in eight states is that you can ask—and businesses are required—to give you the balance back, because they require refunding gift-card balances of $4.99–$9.99, upon consumer request.
• Another two, Rhode Island and Vermont, require a refund option only when balances dwindle to $0.99 or less.

Now Starbucks is facing a lawsuit over card-balance refunds. And it might portend more legal fights to come, suggesting that retailers should get a handle on how to refund low balances where state law requires it.

• 47% of US adults have an unspent gift card, totaling $21 billion in unspent value, according to a 2022 study by CreditCards.com.
• The balance of unspent gift cards, vouchers, and store credit averages $175 per person, up from $116 in 2021.

A suit over $4.94: On the surface, it might seem like a lot of effort over a trivial sum: the suit is on behalf of a Boston man named Richard Spencer, who wants a refund of the $4.94 left on his Starbucks’ card, which is a nickel under the $4.99 threshold in Massachusetts. But the lawsuit, filed in August in US District Court in Seattle, where Starbucks is based, also seeks to establish class-action status. That means anyone else with a redeemable amount on their Starbucks card also has a claim against the company for, in the words of the suit, “breach of contract and unjust enrichment.”

The lawsuit notes that Starbucks does has a section on its website for completing an online form for cashing out eligible balances on cards. Still, it’s only for residents of California (who have the highest redeemable threshold, $9.99) and Oregon ($4.99), who can fill out an online form and are sent a check. While customers in the other eight states that have redemption laws can’t fill out the online form, the Starbucks website does direct them to call a toll-free number.

In a statement to Axios, Starbucks said the lawsuit had no merit, and that it is “well aware of state gift card redemption requirements and has proper policies and procedures in place to honor valid gift card cash redemption requests.”

Redeeming qualities: In a similar lawsuit in May, a New Jersey resident, Daniel Crooks, wanted to cash in the $4.54 left on his Dunkin’ gift card, as his state, with a $4.99 cash-redemption threshold, permits. But, as the suit puts it, there was “no mechanism to refund the value of the card.” Like the Starbucks lawsuit, this one, which is filed in Dunkin’s home state of Massachusetts, also asks the judge to both rule against Dunkin and for class-action status so the ruling can apply to all Dunkin gift-card holders.

Edgar Dworsky, a consumer advocate and lawyer who wrote about both lawsuits on his website, Mouseprint, said that retailers who don’t want to get dragged into court should make the process simple.

Rather than filling out online forms, calling customer-service lines, and awaiting checks, it “should just be a simple transaction—at the very place you would use the card you should be able to get a refund,” he told us. “Consumers shouldn’t have to jump through an awful lot of hoops to get back $3 or $4 on a gift card.”