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Gift Card Reforms are coming in 2019

11 December 2018

In October 2018, the Australian government passed amendments to the Australian Consumer Law to more closely regulate gift cards and gift vouchers.

Retailers and businesses that provide gift cards or gift vouchers will need to ensure that they take steps to comply with the new requirements.

The changes are implemented under the Treasury Laws Amendment (Gift Cards) Act 2018 (Cth) and will take effect from 1 November 2019 - in time for the start of the Christmas shopping season.

The key changes introduced by the legislation are set out below.

Definition of Gift Card

A gift card is broadly defined as follows:

99A Meaning of gift card

A gift card is:
(a) an article (whether in physical or electronic form) that:
(i) is of a kind that is commonly known as a gift card or gift voucher; and
(ii) is redeemable for goods or services

The government also has power to make regulations including or excluding particular types of gift cards in the definition.

Minimum Expiry Period - 3 years

For gift cards supplied to a consumer after 1 November 2019, the supplier must ensure:

  • the gift card does not expire less than 3 years after the date of issue
  • if the gift card has an expiry date - the expiry date or validity period is clearly stated on the gift card
  • if the gift card has no expiry date - the gift card shows a clear statement to that effect.

If a gift card has a shorter expiry date, the legislation overrides the shorter expiry and imposes the minimum 3 year expiry period.

It will be important for businesses to either ensure that all gift cards are compliant with the new regime, or keep records of which gift cards were issued prior to the 1 November 2019 start date (such as by recording the issue date on the gift card itself).

Post-Supply Fees will be illegal

As well, it will be unlawful to charge a “Post-Supply Fee” to a consumer. A Post-Supply Fee is a fee charged in relation to the gift card after it is supplied to a consumer, such as a charging a fee to redeem or use the gift card.

Penalties

Contravention of the above provisions will be an offence under the Australian Consumer Law - with penalties of $30,000 for corporations or $6,000 for individuals.

What is not addressed?

A key issue that has not been addressed in the amendments is security for consumers if the retailer goes into liquidation or insolvency.

Under current law, a gift card holder is treated as an unsecured creditor of the retailer. A gift card is essentially a kind of IOU; a ‘promise’ to provide goods or services to the value of the card. This means that if the retailer goes into liquidation, the gift card holder is at significant risk of being unable to recover the value of the gift card.

In recent years, several high-profile retailer collapses (including Dick Smith Electronics, Toys R Us and Roger David) have left consumers unable to redeem unused gift cards. In some cases administrators have sought to impose additional conditions on gift card holders (such as a requirement to make further purchases) in order to redeem the gift cards.

Consumers should be mindful the legislation amendments do not address these shortcomings. Further significant reform to insolvency law will be necessary to provide better protection to consumers.

Image Credit: Adapted from Donald Trung [CC BY-SA 4.0] via Wikimedia Commons

This post is intended for general information only and is not intended to constitute legal advice. You should obtain appropriate professional advice for your circumstances or contact us for further assistance.

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