What Are the Legalities Surrounding Expired Gift Cards?

Updated on October 7, 2020

Reading time: 5 minutes

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 the gift cards’:

expiry date;
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).

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. 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.

What is the Difference Between Gift Cards and Cash?

Gift cards are cards loaded with a specified amount of cash. 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 are creating 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.

If you are issuing gift cards as a business owner, 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 New 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.

Expiry Date

The ACL now requires most gift cards and vouchers to have a mandatory minimum expiry period of three years from the date that the gift card is sold 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 at all. The expiry date of the gift card must be clearly displayed on the card as either the full date or as a period of time. If you would like the date to be shown as a period of time, you need to include the supply date. For example, you may include the terms:

“Valid for three years from 11/2019”; or
“This card will expire three years after supply. Supply date November 2019”.

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 amendments in the law have also banned charging any post-purchase fee or post-supply fee. A post-supply fee is a fee charged that reduces the value of the gift card. Some of the fees that are banned include:

card activation fees;
account keeping fees; and
balance enquiry fees.

This ban does not include fees that are normally charged to the customer regardless of how they pay for the goods or services. Therefore post-purchase and post-supply fees do not include:

booking fees;
payment surcharges;
currency exchanges; and
fees charged to reissue a lost, stolen or damaged card.

Which Gift Cards Do the New Laws Apply To?

The new 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

If your business does not sell gift cards legally by complying with the new gift card rules, you will have breached the law and may be subject to financial penalties. 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.

The Australian Competition and Consumer Commission can also impose infringement notices on businesses, with financial penalties starting at $2,400 for individuals and $11,500 for corporations. It is also important to note that if the terms and conditions of a gift card issued after November 2019 do not comply with the amendments, these terms will be void and the new requirements will apply.

Key Takeaways

If you run a business that offers gift cards to its customers, you need to make sure you are up to date with the new laws to avoid penalties. If you issue gift cards or you plan to in the future, you should:

clearly state if there is an expiry date or not;
clearly display the expiry date in accordance with 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.

As these laws are Australia wide, you should also check if there are any specific state-based laws that apply to your business. If you have any questions about the new laws, how to sell gift cards legally or need help with your terms and conditions, contact LegalVision’s commercial lawyers on 1300 544 755 or fill out the form on this page.

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