As a business owner, you may wish to issue gift cards to your customers. If this is the case, you must ensure your business is choosing to sell gift cards legally by complying with the new laws to avoid penalties for non-compliance. The Australian Consumer Law changed in November 2019 to provide greater protection for Australian consumers who purchase or receive gift cards. The amended consumer laws relate to:
- expiry dates;
- terms and conditions; and
- post-supply fees. A post-supply fee is a fee charged to the recipient of the gift card after it has been purchased or supplied, usually for administration or other reasons.
This article will explain how the new gift card laws work and what your business will need to do to issue gift cards under these new laws.
Difference Between Gift Cards and Cash
Gift cards are cards loaded with a specified amount of money. Therefore, gift cards differ from cash because they are subject to restrictions and limitations set out in the terms and conditions. Essentially, when you issue a gift card to a consumer, you create a binding contract that allows them to purchase goods or services in a restricted manner. For example, some gift cards may have an expiry date.
Suppose you are issuing gift cards as a business owner. In that case, you should ensure that your terms and conditions are drafted correctly and up to date with the Australian Consumer Law to avoid penalties and other legal consequences.
What are the Gift Card Provisions?
Under the Australian Consumer Law (ACL), any gift card supplied on or after 1 November 2019 must:
- be redeemable for at least three years after the date of purchase;
- not include any post-purchase fees (with a few limited exceptions);
- clearly display the expiry date if there is one; and
- state on the gift card if there is no expiry date.
While New South Wales retains their state-specific laws around gift cards, South Australia has since repealed their laws around gift cards because of the new provisions under the ACL.
Since March 2018, gift cards and vouchers sold in NSW must have:
- an expiry period of three years, at a minimum; and
- no additional fees after the purchase, such as booking fees.
This rule applies alongside the national rules in NSW. However, some gift cards and vouchers are excluded, such as those that:
- customers receive from a business for free;
- are exchanged for goods;
- sold at a genuine discount, being below the market price of the good or service it applies to; and
- a business donates to a charity organisation or as part of a fundraising appeal.
Expiry Date
The ACL requires most gift cards and vouchers to have a mandatory minimum expiry period of three years from the date the business sells the gift card to a consumer. As a result, if you are a business owner, you can make this period longer or choose not to impose an expiry date. You must display the gift card’s expiry date on the card as either the full date or as a period of time. You need to include the supply date if you want to display a time period.
If you do not wish to impose an expiry date on the gift card, then you must clearly state on the gift card that there is no expiry date.
Ban on Post-Purchase Fees
The law also bans charging post-purchase or post-supply fees. A post-supply fee is a fee charged that reduces the value of the gift card. Some of the fees that are prohibited include:
- card activation fees;
- account keeping fees; and
- balance enquiry fees.
This ban does not include fees normally charged to customers regardless of how they pay for the goods or services. Therefore, post-purchase and post-supply fees do not include the following:
- booking fees;
- payment surcharges;
- currency exchanges; and
- fees charged to reissue a lost, stolen or damaged card.
When Does the Law Apply?
The laws apply to all gift cards or vouchers sold on or after 1 November 2019. It includes gift cards for stores that trade in Australia and applies to both online and physical stores. However, there are some categories of exceptions where the legislation will not apply. The three-year minimum expiry period does not apply to gift cards that are:
- able to be reloaded or topped up;
- given for free for promotional purposes;
- supplied at a genuine discount;
- second-hand gift cards;
- part of an employee reward scheme;
- given as a bonus as part of a customer loyalty program;
- only available for a specific period; or
- part of a temporary marketing promotion.
Consequences of Non-Compliance
Therefore, breaching these laws could lead to fines of up to:
- $30,000 if you are a body corporate; or
- $6,000 if you are an individual.
Consumer Rights
There are certain situations where the rights of a consumer may be affected. As a business owner, you must ensure that the consumer is protected.
For example, suppose you must close or temporarily restrict your trading for an extended period. In that case, you should provide some form of remedy so that the consumer can still use the gift card. This includes extending the gift card expiry date to cover the period recipients could not use the card.
Another example is when you have purchased a business where the previous owner issued gift cards. As the new business owner, you should still honour existing gift cards, especially if you have purchased the business as a ‘going concern’.
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Key Takeaways
If you run a business that offers gift cards to its customers, you need to ensure you are up to date with the new laws to avoid penalties. Likewise, if you issue gift cards or you plan to in the future, you should:
- clearly state if there is an expiry date;
- clearly display the expiry date per the three-year minimum period;
- not charge post-purchase fees;
- update your terms and conditions or have them drafted if you do not have any.
If you need help complying with the new gift card laws, our experienced competition lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
Gift cards differ from cash because they are subject to restrictions and limitations set out in the terms and conditions of a business.
Gift cards must (1) be redeemable for at least three years after the date of purchase; (2) not include any post-purchase fees (with a few limited exceptions); and (3) clearly display the expiry date if there is one or state there is none.
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