New Gift Card Laws in NSW
Published on February 22, 2018 by Mathisha Panagoda
While in years gone by it was perfectly acceptable to stick a crisp $20 note into a birthday card and leave it at that, there has been preponderance in the sale and marketing of gift cards over the past decade. Now your uncle Merv is obliged to personalise his gift to you by not only giving you $20, but determining exactly which shop you are to spend it at. While this might mean that Uncle Merv goes up in your estimation because he know just how much you love spending money at Big W as opposed to K-Mart, it also means his gift comes with conditions as to how, where and when you can spend the $20.
Not only that, the 5c left over from the lovely $19.95 biography on Denise ‘Ding-Dong’ Drysdale will stay on your gift card and return to the coffers of Big W if you don’t get around to spending it. All of which adds up and is known in the retail gift card business as ‘breakage’ which it is estimated results in around $60 million lost by consumers in New South Wales every year due to expired gift cards and gift vouchers. Often gift cards are misplaced or forgotten only to be found after the expiry date.
Forthcoming amendments to the Fair Trading Act 1987 (contained within the Fair Trading Amendment (Ticket Scalping and Gift Cards) Bill 2017) aim to address this issue and better protect consumers by ensuring that money spent on gift cards is not reduced by hidden administrative fees and early expiry dates.
The NSW Government is introducing a mandatory minimum expiry period of three years for gift cards and gift vouchers sold to consumers in NSW. The period begins from the date the gift card is sold to a consumer (also known as the issue date).
There will also be a ban on sellers of gift cards charging administration fees after the sale in an effort to prevent consumers being hit with hidden charges that reduce the value of their gift card. Some of these fees have previously included activation fees, balance enquiry fees and inactivity fees. There are some fees that will still be allowed as they are part of the cost of processing a payment such as fees for overseas transactions, payment surcharges and booking fees.
When do the changes commence?
These new amendments take effect from 31 March 2018. The reforms do not apply to gift cards purchased before this date. There is a transition period from 31 March 2018 to 30 September 2018 in which businesses can run down their existing stock of pre-printed gift cards but they must take steps to inform customers that a three year expiry and no post-purchase fees apply.
Where are the changes effective?
A gift card is defined as a card or voucher in hard copy or electronic form that is redeemable for goods or services in NSW. These amendments only apply to gift cards sold to a consumer who is in NSW at the time of sale or to a consumer who provides a NSW address in connection with the sale. If the consumer is outside of NSW then the reforms do not apply.
If for example a gift card is purchased in NSW for a restaurant that only operates in Tasmania then the reforms will not apply.
At this stage there does not appear to be any similar proposed legislation in other States or Territories of Australia however it may be likely that businesses operating in NSW will implement these changes across operations in other jurisdictions to reduce potential complexity and confusion. Notably, RedBalloon has rolled out three year expiration dates across all of Australia and New Zealand since the bill was passed in NSW Parliament on 18 October 2017.
Some gift cards are excluded from the reforms. These include gift cards given by a business to a consumer for free, prepaid cards or vouchers for phone or internet access credit, ATM debit, credit and prepaid travel cards, cards supplied as part of customer loyalty programs, and gift cards that are donated for use in a fundraising appeal.
If the seller goes out of business these reforms do not assist and gift card holders are considered unsecured creditors as was the unfortunate case for holders of Dick Smith Electronics gift cards.
If your business sells gift vouchers or gift cards, you should take steps to prepare for these reforms. This may involve reviewing and updating terms and conditions on your website, at check out and on physical gift cards/vouchers.
If terms and conditions of a gift card do not comply with these reforms then they will be void and, for example, a minimum three year expiry date will be applied regardless of what is written on the gift card.
Penalties for non-compliance include a penalty notice of $550 or a maximum penalty of 50 penalty units (currently $5,500).
If you are unsure how these reforms affect your organisation, business or yourself as a consumer, contact Carroll & O’Dea Lawyers for further advice.
If you are a consumer, you no longer have to pine for the days when a fresh lobster would fall from your birthday card, safe in the knowledge that gift cards will be able to be used in a much fairer manner.
How did this all come about?
Reforms such as these have already been introduced in countries such as the United States of America, Canada and the United Kingdom. Leading consumer advocacy group CHOICE have long campaigned for reforms to gift card laws and NSW Fair Trading have been in receipt of numerous complaints.
The reforms have not been without criticism noting the time, resources and investment required for businesses to implement these changes, potential adverse impacts on cash flow and stock take, the relatively swift implementation of the laws, potential jurisdictional competitive issues for retailers, and issues concerning the cost of goods and services rising over a three year period. Overall however this is a win for consumers and those long lost Christmas gift cards in the kitchen drawer.
Ding Dong Drysdale could not be reached for comment.