Call 1800 POD LEGAL   

Retailers: Are Your Ready for the New Gift Card Laws?

 Gift cards have long been a useful tool in the consumer playbook. They’re essential for that picky person, or the relative you can never decide what to buy. Of course with the explosion of online shopping in recent years, gift cards have become extremely popular.

The Financial Review reported last year that gift cards are the most popular gift given in Australia. However, at the time of writing, people still predominantly purchased physical cards. The popular paper believed that the Australian market had hit a turning point and that online gift cards were about to overtake the old physical option in popularity.

An example of what that could mean for Aussie retailers can be drawn from INTERSPORT, the global sports retailer. The company launched their online gift card trial from 2016 to 2018 in a handful of European countries. During this time, they saw an additional twenty million euros spent on gift cards, from previous years.

The Australian gift card market is already worth $2.5 billion dollars. As online gift cards increase in popularity, this market is likely to grow.

While the convenience they buy may be worth billions to the Australian market, retailers beware. Some major changes are coming that could require you to completely alter the way you sell gift cards, and the policies you have in place.

Fighting unused dollars

From the 1 November 2019, new Australian laws will come into play, aiming to protect gift card purchasers from wasting their hard earned cash.

The new laws aim to save all those gift cards that lay forgotten at the bottom of handbags and office drawers – gift cards that The Age reported in 2017 amount to $70 million unused dollars, each year.

There’s three major changes that retailers need to be aware of:

1. The implementation of a minimum three-year expiry period across most gift cards (except for specifically exempt scenarios discussed below);

2. Expiry periods must be prominently displayed; and

3. Retailers can no longer charge post-payment fees, such as activation fees.

All gift cards sold from 1 November must comply with these laws. For some retailers, this may require the complete rewriting of your current gift card policies.

The minimum expiry period

Most gift cards have an expiry date of one year from the purchase date, but this will no longer be acceptable under the changes to Australia’s Consumer Laws.

The minimum three-year expiry date, from date of purchase, is a mandatory change for all gift cards, except in specific scenarios.

The specifically excluded gift cards include those:

  • that can be reloaded or topped up;
  • purchased for a specific good or service only available for a limited time (for example, an art show);
  • given to customers for a temporary marketing promotion;
  • donated for promotional purposes (for example, in raffle baskets);
  • sold for a particular good or service at a genuine discount (for example, 50% off massages);
  • used in an employee rewards program or customer loyalty program; or
  • sold as second-hand gift cards (the original purchaser would have three years, but a second hand purchaser buys whatever expiration period is left).

Display of expiry periods

Most businesses comply with this law already out of convenience but it will become mandatory to prominently display expiry periods. If your business sells gift cards that state a period of time, rather than individual expiry date (such as ‘this card will expire three years after supply’), then the date of purchase must be prominently displayed.

What it means to be displayed prominently will depend on the design of gift card your business uses. Essentially it must be clear and easy to find for everyday customers, not just lawyers, who are accustomed to reading fine print!

Alternatively, if your gifts cards last forever and have no expiry date, you must display this fact prominently.

Ban on post-purchase fees

The changes also require that businesses stop charging fees after a gift card has been purchased. Common examples of post-purchase fees include activation fees, account keeping fees and balance enquiry fees.

Post-purchase fees do not include those required to cover payment however, such as surcharge fees, booking fees, and overseas transaction fees. This means that businesses are still able to make these kinds of charges.

Also, businesses can still charge customers a fee for replacing a lost, stolen or damaged card.

Next steps for retailers

To comply with the new laws, the Federal Government has recommended retailers update their in-store and online terms and conditions in advance. Retailers may also need to change the terms and conditions listed on the cards themselves, which could mean ordering new cards if they have been pre-printed with the wrong information.

The Government also recommend placing signage that notifies purchasers of the changes, on gift card displays, at the point of sale and on receipts.

It’s best to look into what will be required of your particular business, as soon as possible as breaches could attract serious fines.

The fines are currently set at $30,000 for companies and $6,000 for individuals. However, you could also face additional infringement notices from the Australian Competition and Consumer Commission (ACCC) resulting in a penalty of $11,500 for each notice to companies and $2,420 for each notice to individuals.

The new laws may require you to completely redevelop your current gift card policies, but the cost of not changing them could result in thousands of your businesses hard earned dollars going down the drain.