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The Risk of Gift Vouchers: From the Trader’s Perspective

Gift cards, vouchers or certificates are commonly used by businesses to attract new customers and to generate, what are often, relatively easy sales. Just like almost anything done to promote business, however, the Australian Securities and Investments Commission (ASIC) takes an interest in the use and terms associated with these gift certificates. Below are a few important tips to consider when introducing gift certificates to your business.

  1. Cannot be reloaded
    One serious concern is ‘reloading’ gift certificates. Providing for any form of payment other than Australian or foreign currency looks a lot like a credit facility, which is regulated by credit facility laws. Treating a gift certificate as a transferable form of currency by allowing reloading may infringe credit licencing laws.
  2. Clearly display a reasonable expiry date
    A trader is not ordinarily required to honour a gift certificate after the stated expiry date. However, traders should be aware that minimum expiry periods may apply. For example, it recently became law that New South Wales traders must set a minimum expiry periods of three years. Nothing prevents a consumer from negotiating with a trader to extend the expiry date.
  3. Cannot be redeemed for cash
    Most terms rightly claim that gift certificates are not redeemable for cash. Yet it is not unusual to see some stores pay out a remaining nominal balance of a gift certificate in cash. To avoid doubt, traders are, in fact, not permitted to provide cash to meet the remaining value on a gift certificate.
  4. Highlight critical terms
    The purchaser of a gift certificate, as well as the person redeeming a certificate, must both be made aware of the applicable terms. These terms should be apparent on the card, and indicate such things as expiry date and any applicable restrictions on the use of the certificate. 

Offering gift certificates is a great way to grow your business through a wider customer base. However, distributing gift certificates without understanding the law can land your business in trouble with ASIC, not to mention the very real prospect of negative publicity, via social media. If you’re considering offering gift certificates to potential customers, then you would be well served to first ensure that you fully understand your legal obligations.