As the festive season approaches, are you aware there are new rules for gift cards?
In Australia, around 34 million gift cards are sold each year with an estimated value of $2.5 billion. On average, an estimated $70 million is lost because of expiry dates. Until recently, there was no national regulation for the minimum length of time a gift card should last. There are now new rules for gift cards.
Applying from 1 November 2019, new laws are in effect that introduce a regime for the regulation of gift cards including:
- A minimum 3 year expiry period
- Bolstering disclosure requirements, and
- Banning post-supply fees.
What business needs to do
From 1 November 2019, businesses should ensure:
- All gift cards have a minimum three year expiry period. Any existing gift card stock should be run down and production reviewed to ensure that once the new regime comes into effect, only compliant gift cards are issued.
- Ensure disclosure requirements are met. The expiry date or the date the card was supplied and a statement about the period of validity must be set out prominently on the gift card itself. For example, if the supply date was December 2019, “Supply date: December 2019. This card will expire in 3 years,” or “Valid for 3 years from 12/19”. It is assumed that the card expires on the last day of the month where only the month and year are displayed. If the gift card does not expire, the card will need to clarify this by stating words to the effect of, “never expires”.
- Post-supply fees are not charged. A post-supply fee is a fee that is charged reducing the value of the gift card such as administration fees for using a gift card. Post-supply fees exclude the fees that are normally charged regardless of how someone pays for a product or service. For example, booking fees, a fee to reissue a lost or damaged card, and payment surcharges.
A number of larger businesses have adopted a 3 year expiry period following the introduction of NSW laws. These include David Jones, Myers, Westfield, Rebel Sport, Coles, and Dymocks. Other retailers have no expiry dates including iTunes, JB Hi-Fi, EB Games, Woolworths and Bunnings. As a result, generous expiry periods are a point of difference when consumers are working out which retailers gift card to purchase.
What happens if a business ignores the new rules?
Once the new rules come into effect, if a gift card is supplied with less than a three year expiry period, the disclosure requirements are not met, or post-supply fees are charged, a penalty may be imposed of up to $30,000 for a body corporate and $6,000 for persons other than a body corporate. In addition, the ACCC has the ability to impose infringement notices. Each infringement notice is 55 units (currently $11,500) for a body corporate and 11 units (currently $2,420) for persons other than a body corporate.
What happens if a business becomes insolvent or is sold?
Consequently the consumer’s rights do not change if the business becomes insolvent or bankrupt. The consumer becomes an unsecured creditor of the business. If a business changes owners, the new owner must honour existing gift cards and vouchers if the business was:
- Sold as a ‘going concern’. That is, the assets and liabilities of the business were sold by the previous owner to the new owner.
- Owned by a company rather than an individual, and the new owner purchased the shares in the company.
The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.
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