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As we enter 2026, many colleges and universities are closing the books on the class action cases that swept across the industry for the past five years: tuition refund cases arising out of the transition to remote learning during the onset of the COVID-19 pandemic. Unfortunately, the New Year appears to offer no reprieve from the mounting number of class actions brought against universities by their students. Indeed, a new wave of class actions are being filed in courts across the country alleging that, by retaining students’ unused meal plan swipes and dollars, universities are violating state consumer protection laws called “gift card acts.” These cases have been filed in multiple states, including Connecticut, New York, and New Jersey.
While gift card acts vary from state to state, their general purpose is to prevent companies from adopting unfair practices for retaining unused or expired funds loaded onto gift cards. Most of these statutes define “gift card” broadly to include any medium of stored consumer value, including a physical card or an electronic record. These statutes emphasize issuer obligation, not program branding or format. Gift card statutes generally extend to most circumstances where the consumer pre-paid some value to the issuer in exchange for a promise from the issuer to provide future goods and services.
The CARD Act of 2009, a federal statute, sets the floor for fair gift card practices. Under the CARD Act, gift cards may not expire for at least five years from activation and inactivity fees are prohibited in most circumstances. Many states follow the federal standard set under the CARD Act, though certain state statutes provide more stringent requirements. For example, some states broadly prohibit expiration dates on gift cards (e.g., Arizona, California, Connecticut, Maine, Minnesota, Montana, New Hampshire), whereas a larger group of states permits expiration, often subject to minimum time periods and clear disclosure requirements. Of the states that allow expiration of gift cards, many require the expiration date to be clearly and conspicuously stated, often with minimum font sizes (e.g., Maryland, Nevada, Oklahoma) or specific placement, such as on the front of the card or on the sales receipt.
The CARD Act and its state analogues, however, also have potentially applicable carve-outs to the definition of “gift card” and/or exemptions relating to the expiration and fee prohibitions. For example, the federal definition of “gift card” does not include an item “not marketed to the general public” or items “redeemable solely for admission to events or venues . . . which may also include services or goods” available at those venues. See also N.J. Stat. Ann. § 56:8-110.1 (limiting “gift card” to a “tangible device” as opposed to an electronic balance); 60 Okla. Stat. § 797 (prohibition on expiration dates does not apply to gift cards “issued for a food product”).
Although states’ gift card provisions vary, the allegations against colleges and universities in this new wave of class actions are similar across the various lawsuits filed thus far. Plaintiffs essentially make two contentions: (1) institutional meal plans, accessed by students through their ID cards, are, or operate like, gift cards; and (2) institutional retention of unused balances or “swipes” that remain on student accounts at the end of the academic year violates the applicable state gift card statute’s non-expiration and refund requirements. Plaintiffs further allege that institutions fail to clearly disclose this practice and that retaining unused meal plan dollars violates the “junk fees” provisions of gift card acts, which generally prohibit surprise fees and non-descript fees such as “convenience,” “processing,” or “service” fees. The lawsuits filed to date also assert claims for other consumer protection statutory violations and common law tort claims.
There are, of course, many open questions regarding these cases – most notably whether meal plans are considered gift cards under each state’s gift card act. And schools likely will assert multiple legal and factual defenses to these new class actions, including that meal plans are not gift cards; schools offer a variety of meal plan options to choose from; students’ meal plan arrangements with schools are a matter of contract, not statutory or tort law; schools’ policies with respect to meal plans are clearly communicated to students; and nothing prohibits students from spending any unused dollars before the end of an academic year. It will take time for the courts to begin deciding the merits of these claims. In the meantime, there are actions colleges and universities can take, in consultation with counsel, to be prepared for this next wave of class action lawsuits, including:
- Researching whether your state has a gift card act or similar statute and examining the provisions of that act in conjunction with your meal plan policies;
- Analyzing, in consultation with counsel, your meal plan policies and student agreements to identify contract language addressing unused meal plan dollars in order to evaluate the extent to which your institution may rely on that language to reduce the risk of a successful gift card statutory claim;
- Engaging with inside or outside counsel early to assess the status of gift card act statutes and case law interpreting them in your state and begin outlining defenses to potential class action claims;
- Reviewing complaint allegations based on gift card statues in your state or in states with comparable statutes to evaluate how other institutions’ treatment of meal plan dollars differs from yours;
- Reviewing relevant liability insurance policies with risk management and pro-policyholder coverage counsel to assess the availability of insurance for these types of lawsuits; and
- Engaging with relevant campus stakeholders to ensure that institutional procedures and policies regarding meal plans are adequately disclosed, consistently applied, and reflective of the on-the-ground experiences and expectations of students and staff.
Schools should work closely with counsel to stay informed and proactive as they face various evolving risks and opportunities. As always, the Reed Smith Higher Education team is willing and able to assist.
Client Alert 2026-011
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