The New Gift Card Regime
Changes to the Fair Trading Act 1987 (NSW) will introduce a new mandatory minimum expiry period of three years for most gift cards and vouchers sold in New South Wales from 31 March 2018. The new legislation will apply to cards and vouchers sold both in-store and online. The State Government Minister for Better Regulation, Matt Kean, announced the forecast changes in October 2017.
This is serious business – more than $2.5 billion worth of gift cards and vouchers are sold every year in Australia, or approximately 34 million cards – more than 1.5 per head of population. Of these, approximately 8% do not use the full balance on the card due to the card/voucher expiring before the recipient has an opportunity to redeem the full value of the gift. As a result, NSW Fair Trading has been inundated with thousands of complaints over the last five years, forcing action under the much-touted ‘Consumers First’ policy strategy that is being incrementally introduced.
Three–Year Minimum Expiry Period
The new regime mandates that an expiry period of at least three years is to apply to all gift cards and vouchers. The period is to commence from the issue date of a gift card/voucher. The issue date is the date the card/voucher is sold to a consumer.
Post – Purchase Fees
Applying ‘post-purchase fees’ will also be banned under the new regime. A post-purchase fee is any charge levied against the remaining value on a card/voucher. Under Federal legislation such fees are limited to one per month and only if the card or voucher has been left unused for one year. Vendors have never been able to adequately explain why such fees were necessary or why dormancy incurred additional costs to their business commensurate with the fees charged.
Typically, the types of fees that have been charged were associated with the activation of a gift card or voucher, fees claimed for account keeping, balance enquiries, and telephone enquiries. Inactivity or dormancy fees, claimed when the card or voucher is not in use, have also been banned.
Purchasing Gift Cards or Vouchers Online
The legislative amendments will apply to gift cards or vouchers sold to consumers who reside in New South Wales at the time of sale, and those sold to consumers who provide a New South Wales address when making purchasing the card/voucher.
Gift cards and vouchers sold to consumers who provide an address outside New South Wales, will not be required to attach the three-year minimum expiry date. It is to be hoped that vendors will automatically extend the minimum to non-NSW residents as a sign of good corporate citizenship.
The new laws will not apply to the following gift cards and vouchers:
- Those given by a business for free to a consumer;
- Those exchanged for goods returned to the supplier of the goods;
- Prepaid cards for phone credit internet access;
- Charge cards, credit cards, debit cards or ATM cards;
- Those supplied as part of a loyalty or employee rewards program;
- Those supplied as part of temporary marketing promotion as a bonus to the purchase of a good or service;
- Those sold for a particular good or service that is below the market value of the good or service;
- Those sold or donated for use in a fundraising appeal, charity, or not for profit organisation;
- Those that are reloadable and use EFTPOS, Visa or Mastercard or similar electronic payment systems;
- Those intended for goods or services available for a limited time where the gift card or voucher expires at the end of that period.
The new regime also excludes ‘non-reloadable’ pre-paid gift cards that use the electronic transfer systems provided by EFTPOS, Visa or Mastercard, and were, or will be, sold before 1 October 2018. However, after that date, those systems must also allow redemption without fees.
Replacement Cards and Vouchers
For the purposes of the new legislation, cards that are either given free to consumers, or those that are used as a cash replacement for returned goods are exempt from the no-fee, 3-year expiry regime.
This also applies to any card provided as a replacement for a lost card. The reasoning for this is that a replacement card has not been sold and is therefore not a ‘new’ card. It is expected, but not required, of businesses to provide replacement cards with the balance of the three-year expiry remaining.
However, vendors are not obliged to replace lost or stolen cards/vouchers – they are treated like cash. A willingness by a vendor to replace a card is then a matter of corporate policy, not a legal obligation, and consumers cannot demand a replacement.
From 31 March 2018 to 30 September 2018, businesses can sell existing stock of pre-printed gift cards. Consumers must be informed clearly when a card is exempt from the 3-year expiry regime and whether post-purchase fees apply. The NSW Government Department of Fair Trading is providing businesses and consumers with a range of point-of-sale and other advisory materials that detail the new laws.
For further information about the changes, Fair Trading New South Wales provides detailed information for consumers and suppliers.
By Andrew Carr, GTC Lawyers
This article is published for general information only and is not intended to provide specific legal advice. It is important that you consult with a lawyer to discuss your case specifically, rather than rely on general information as to the law.