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Selling gift cards or vouchers can be a great business opportunity for many businesses. If your business sells gift vouchers, you need to ensure that your practices are legally compliant. The Australian Competition and Consumer Commission (ACCC) has been recently focussing on how these gift vouchers are presented to the unsuspecting consumer. Therefore, you must comply with gift card laws to ensure you do not face any hefty fines. This article will explain the key legal considerations for selling gift vouchers that you will need to implement.

Displaying the Expiry Date

In general, when a consumer comes to a particular business to use or redeem their gift voucher, they will not be permitted to do so if the expiry date has already passed. 

However, as of 1 November 2019, most gift vouchers issued in Australia must have a minimum three-year expiry date. This was introduced into the Australian Consumer Law (ACL) to protect consumers from businesses preying on vulnerable consumers who forget to use their gift card.

It is not enough for a gift card to have a three-year minimum term. The gift card must also clearly display when the expiry date is. You can do this by: 

  • showing the exact date the gift card will expire;
  • stating the date the card was issued and that it will expire in three years; or
  • if the gift card has no expiry date, stating this on the gift card.

Redeeming the Voucher For Cash

Gift vouchers should have terms and conditions attached to them. These terms and conditions typically express that cash cannot be redeemed in exchange for the voucher. 

Despite this, some businesses will redeem the remaining balance of a voucher or gift card in exchange for a cash payment if they believe the customer cannot conviniently use amount remaining.

Charging Fees

If your business sells gift vouchers, you should be careful not to charge post supply fees on your vouchers. Post supply fees are fees that reduce the value of a gift card over a period of time. 

For example, these types of fees include: 

  • administration fees; or 
  • fees to check the account balance of a card.

The fees can effectively reduce a gift card holder’s balance to zero without them ever using the card. 

There are certain situations where you can charge fees, including fees relating to: 

  • currency exchanges; and 
  • booking fees.

However, you can only charge these if customers without a gift card would also be charged in the same situation.

Terms and Conditions

You must always clearly communicate the terms and conditions of using the voucher to the public. Some key terms that you should specify in the terms and conditions include:

  • the entity issuing the gift card;
  • the expiry date;
  • exclusions to using the gift card;
  • any limitations on the number of instructions;
  • whether or not the card can be topped up;
  • how to redeem the gift card;
  • what happens when purchases exceed the remaining gift card value;
  • rules around exchanging items purchased with a gift card; and
  • how your business deals with faulty, damaged and list gift cards.

False and Misleading Representations

Businesses are not allowed to make statements that are not correct or are likely to create a false impression. This rule also applies to the advertising, packaging and any information provided to consumers regarding gift cards.

For example, you cannot tell consumers that a gift card is valid indefinitely if, in fact, the gift card is only valid for a period of three years. 

Similarly, if a buyer tells you they are purchasing a gift card to use at their other store, but the gift card is not valid at that store, you have to tell them that the gift card will not work.

Penalties for Gift Card Infringements

In an effort to protect consumers, the ACCC has imposed penalties on businesses that breach gift card regulations. Companies can face fines up to $30,000, and non-companies can face fines up to $6000 for breaching the gift card rules. 

On top of the financial burden of breaching the relevant laws, the negative publicity that this kind of conduct can bring may also be damaging to a business’s brand.

Key Takeaways

Gift cards are an effective tool for businesses to broaden their customer base and increase revenue. If your businesses sell gift cards, it is crucial to consider the legalities surrounding them. Importantly, you must make sure you:

  • comply with laws surrounding expiry dates;
  • communicate these dates to customers; 
  • have a thorough set of terms and conditions; 
  • do not charge illegal fees; and
  • are careful not to misrepresent gift cards or mislead buyers. 

If you need assistance with understanding the new laws or preparing your gift card terms and conditions, contact LegalVision’s contracts lawyers on 1300 544 755 or fill out the form on this page.

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