When Is Cash Not Cash? At A California Starbucks

Written by Evan Schuman
February 1st, 2008

Last October, California passed a law that cracked down on gift cards, banning expiration dates and most service fees. But it also said that retailers must allow consumers to cash in any balances less than $10.

Avoiding the question of what one could buy at Starbucks for fewer than ten dollars (I know: A couple of shorts), the law said such low balances are "redeemable in cash for its cash value." But Starbucks has been turning away California caffine-addicted consumers seeking such as cash paybacks because they have yet to update their POS software to make such efforts possible.

Even though the law has been in effect since before Halloween, Starbucks plans on waiting for its next regularly-scheduled software update to address the issue, which should happen "over the next couple of months," said Starbucks spokesperson Stacey Krum.

Until the POS updates, the chain is directing people to their customer service department, which will mail them checks. Once the POS updates are done, Krum said, stores will be able to give customers their cash.

But the law says "redeemable in cash" and not a check, right? Crumm points out—correctly—that the bill doesn’t require it be cash paid at the store.

Still, doesn’t it have to be cash? A hard look at S.B. 250 gives weight to the Starbucks position. Even though it quite clearly says payments will be "redeemable in cash," a definition section at the end of the document suggests that cash doesn’t really have to be cash.

"For purposes of this section, ‘cash’ includes, but is not limited to, currency or check," said the official copy of the law. "If accepted by both parties, an electronic funds transfer or an application of the balance to a subscriber’s wireless telecommunications account is permissible."

OK, so that pretty much resolves the lack of anything illegal going on amongst the coffee cups, at least insofar as low-balance gift cards are concerned. But this still raises uncomfortable questions. If the law doesn’t require cash payments, why does Starbucks plan on offering them? And if it intended to offer cash, why couldn’t the POS interface have been updated months ago?

Krum said the POS changes is not a new system or anything nearly that elaborate or disruptive. It’s the routine GUI update to allow for new and discontinued products to be properly displayed (or not) on the employee screen.

All in all, it doesn’t appear to be anything especially serious going on around here. But it does seem that Starbucks isn’t taking very seriously a state law they likely never wanted to be signed.


3 Comments | Read When Is Cash Not Cash? At A California Starbucks

  1. John Qunicy Says:

    Interesting article with some good points, but it seems that your main argument here is that Starbucks is dragging its feet on implementing the change.
    The story suggests that changing POS software is the only thing that needs to happen here. This isn’t just adding a new menu item to their systems. You have to take into account the fact that people working the counters now have to start giving cash back to customers, which represents a big liability for the company and could lead to increased rates of fraud. Also, they would need to update their training documents, train their employees on correct procedures and put controls in place (both human and software) to make sure that the company doesn’t get subjected to fraud…among other things.

    So, I’m sure Starbucks is dragging their feet at least a little bit, but your post fails to point out that there a multitude of other business related issues that need to be sorted out before they can start refunding gift card money when it gets below $10. As with most laws, the goverment doesn’t think about the cost and impact this has on the business community. You can’t just flip a switch and make it so overnight.

  2. Evan Schuman Says:

    Editor’s Note: Those are some excellent thoughts, but it should be pointed out that the idea that the only thing needed to be done was changing some of the POS options came from Starbucks, not us. When asked what was behind the delay, that’s what they told us.
    To be clear–and I’ll admit that the story should have been more explicit–it wasn’t a matter of replacing the POS software or even implementing a full upgrade. The POS update referenced was merely updating menu options and other interface issues that chains need to do periodically.
    As for the security and training issues, I’d like to ask you to elaborate a bit as I’m not sure it would be that different. Your comment that government routinely makes requirements without thinking through–or understanding–what it force businesses to do to comply …. that is a very legitimate concern.
    Here, though, I’m not seeing how that would make much of a difference. Starbucks would already have in place procedures for verifying gift card balances and authenticity. They would also already have in place training and security procedures for cash-handling.
    The impact to the business is not that different from when a customer comes in with an $8 balance and asks to have an $8 piece of merchandise. The card still needs to be verified and properly processed.
    The only difference is handing a customer $8 from the cash drawer rather than giving them an $8 coffee and muffin. The trick is having a way to tell the POS that this particular gift card transaction is for a cash refund and to have a rule in place that caps it at $9.99. Is there some other difference involved?

  3. Donald J. Says:

    Man…you guys must be from Cali…if I redeem a gift card with $2.00 on it Iget the cash and the store gets the card… how difficult is that?


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