In brief
From 1 November 2019, gift cards sold in Australia must be valid for at least three years, under new legislation setting out a national framework for their regulation. This provides greater certainty for issuers of gift cards who might otherwise have to comply with different state and territory laws. Partner Jacqueline Downes and Associate Sarah Rodrigues report.
Background
The Treasury Laws Amendment (Gift Cards) Bill 2018 (Cth) passed the Australian Parliament on 18 October 2018. The new national framework for the regulation of gift cards includes a requirement to prominently display expiry information and a prohibition on certain post-supply fees.
The Federal Government's decision to impose a mandatory validity period of three years is an attempt to strike a balance between consumer welfare and businesses' liabilities associated with managing gift cards. The national law gives greater certainty to issuers of gift cards who might otherwise be required to comply with different legal positions under divergent state and territory laws.
In October 2017, the NSW Government introduced laws requiring gift cards sold to consumers in NSW to be valid for at least three years. The South Australian Government later introduced a Bill with similar intent but it is yet to be passed. The states and territories have agreed to support the national framework by amending the Australian Consumer Law (the ACL) as required to give effect to the new laws.
Following the NSW Government's initiative, the Australian Treasury undertook a consultation process to assess whether the Federal Government should introduce similar consumer protections at a national level. Treasury reported that many consumers experience disappointment at an expired gift card, and that the estimated annual losses from gift card expiry in Australia are approximately $70 million. It invited consumers, businesses, and other stakeholders, to provide their views on different options to regulate the gift card market, which included maintaining the status quo, prohibiting expiry dates for all gift cards sold in Australia, or imposing a three-year minimum validity requirement.
The new laws
Parliament has enacted the national law for the regulation of gift cards through an amendment to the ACL.
The new law defines 'gift card' as an article that is commonly known to be a gift card or voucher, whether in physical or electronic form, and is redeemable for goods and services. The explanatory memorandum notes that credit, charge and debit cards, public transport tickets, buy a certain number, get one free customer loyalty cards, and discount offers and advertising material, are not commonly known as a gift cards and will therefore not be caught by the new law. The regulations, which are yet to be finalised, will specify further items that are either fully or partially exempt.
The main components of the new laws are:
- Validity Requirement – gift cards must be valid for at least three years. Any term or condition that has the effect of reducing the validity period to less than three years will be void;
- Display Requirement – gift cards must prominently display the expiry date or the words 'no expiry date' if the card will not expire; and
- Post-Supply Fee Prohibition – post-supply fees are prohibited, except for some acceptable fees, which will be specified in the regulations.
The amendments to the ACL introduce strict liability offences for contraventions of the new provisions. The maximum penalty for contravention of these offences is $30,000 for corporations and $6000 for individuals.
Exceptions to the new laws
On 18 October 2018, the Treasury released exposure draft regulations and related explanatory material for public consultation. The draft regulations set out the types of gift cards that would be exempt from the new laws. Treasury is seeking submissions from interested parties on the exposure draft regulations until 31 October 2018.
Under the proposed regulations, the following would be exempt from all components of the new laws (ie Validity and Display Requirements and Post-Supply Fee Prohibition):
- reloadable cards;
- cards that are redeemable in relation to electricity, gas or a telecommunications service (this exemption would not extend to music streaming or video game services); and
- pre-owned gift cards that are on-sold as second-hand goods.
The following types of gift cards would be exempt from the Validity Requirement, but will still need to adhere to the Display Requirement and Post-Supply Fee Prohibition:
- gift cards issued for temporary marketing promotions, where the gift card is supplied in connection with the purchase of goods or services (eg a $100 gift card if the consumer purchases a white good within the next month);
- gift cards for particular goods or services supplied at a genuine discount on the market value (eg a voucher for a massage valued at $100 for a price of $65);
- gift cards for goods or services only available for a limited period of time (eg a one-night concert or temporary exhibition);
- gift cards donated for a promotional purpose (eg a free gift card to celebrate the first birthday of a store, regardless of whether the customer has made a purchase);
- employee reward schemes; and
- gift cards supplied to certain charities and government agencies.
The draft regulations also propose the following exhaustive list of permitted post-supply fees, being fees that are for:
- making a booking (irrespective of payment methods);
- disputing a transaction;
- the reissue of a lost, stolen or damaged card;
- foreign currency transactions; and
- payment surcharges.
What's next?
The scope of the new national framework on gift card expiry dates will largely depend on the exceptions set out in the regulations. Please let us know if your business would like assistance in making a submission to Treasury on the Government's proposed regulations.