FILE - A Starbucks sign hangs outside a Starbucks coffee shop in downtown Pittsburgh on June 26, 2019. The coffee giant said Thursday, Sept. 1, 2022, that longtime PepsiCo executive Laxman Narasimhan will join Starbucks on Oct. 1, after relocating from London to Seattle, where Starbucks is based. (AP Photo/Gene J. Puskar, File)

Starbucks gift card policy ‘deceptive,’ federal lawsuit claims

The plaintiff, a Boston man, tried to cash out the $4.92 on his card at a Starbucks shop, which refused.

  • By Mike Carter The Seattle Times
  • Tuesday, September 6, 2022 1:30am
  • Northwest

By Mike Carter / The Seattle Times

What to do with that Starbucks gift card that doesn’t have enough credit left to buy a short drip coffee or a puppuccino for Fido?

How about filing a federal lawsuit?

A Boston man tried to redeem a card with a $4.92 balance for cash at his nearest coffee shop. When he was refused, he filed a proposed class-action lawsuit in U.S. District Court in Seattle, alleging the coffee retail giant has unjustly enriched itself by millions of dollars by making it difficult to redeem small balances remaining on gift cards for cash, even when the law requires it.

Richard Spencer filed the lawsuit last month, alleging the company’s popular reloadable gift cards “include unfair, deceptive and illegal conditions that are only revealed to customers after the point of sale, or never revealed at all.”

The lawsuit accuses Starbucks of engaging in “unjust enrichment” and breach of contract.

According to the lawsuit, Massachusetts is among 10 states that have laws requiring companies that issue gift cards to redeem in cash any balance of $5 of less. Washington, Oregon and California are among the Western states with similar statues on the books. The small print on the gift cards states they cannot be redeemed for cash unless required by law.

The lawsuit alleges Starbucks does not emphasize this caveat and that company policy states “gift cards are completely nonrefundable.”

“These small balances add up,” the lawsuit claims. “Defendant has distributed millions of these cards to Gift Card purchasers and holders throughout the United States.”

“Thus, [Starbucks] has acquired at least millions of dollars in revenue to which it is not entitled,” according to the document.

Starbucks gift cards are among the most ubiquitous of presents given to family and friends on holidays and birthdays. The company, in last year’s earnings report, said it sold $11 billion worth of gift cards in 2021 and $12.6 billion the prior year.

Unused Starbucks gift cards contain an estimated $1 billion in value, according to news reports. The number of Starbucks cards sold outstrips the rest of the gift card industry combined, the company says.

The company, on its website, does provide a mechanism for those who live in states that require the cash redemption of small balances, according to a company spokesperson. However, cardholders cannot simply walk into their nearest coffee shop and demand payment.

“Starbucks is aware of state gift-card redemption requirements and has policies and procedures in place to honor valid gift card cash redemption requests in accordance with applicable law,” the spokesperson said in a statement. “We don’t believe this claim has merit and will defend accordingly.”

The spokesperson pointed out — as does the lawsuit — that customers in California and Oregon can submit redemption requests online; however, those living in other “qualifying states” have to call Starbucks customer service at 800-782-7282 to see if they qualify.

Those living elsewhere apparently have no redemption recourse.

The lawsuit asks U.S. District Judge John Coughenour to certify it as a class-action, arguing that Starbucks cardholders number in the millions and that the amount of money involved exceeds $5 million.

The attorneys for Spencer, Issaquah attorney Wright Noel and a firm in Walnut Creek, California, did not respond to emails or phone messages seeking comment.

Talk to us