New laws to affect businesses that issue gift cards - Consumer Law

From 1 November 2019, Australian businesses must ensure that all gift cards they sell or supply to consumers have a minimum three year expiry period, with penalties of up to $30,000 for non-compliance.

The new laws were prompted by ongoing consumer frustration about inconsistent expiry dates on gift cards. They are also intended to bring greater certainty for issuers of gift cards, who might otherwise have to comply with different state and territory laws.

Who will be affected by the changes?

The obligations will apply to 'any person who, in trade or commerce, supplies a gift card to a consumer'. This includes businesses that donate gift cards to charities or consumers as 'prizes', as those businesses are generally considered to be doing so for promotional purposes.

A 'gift card' is defined as an article that is commonly known to be a gift card or voucher, whether in physical or electronic form, and which is redeemable for goods and services. The Explanatory Memorandum to the Bill clarifies that credit, charge and debit cards, public transport tickets, loyalty cards and discount offers are not commonly known as gift cards and will not be captured by the new national regime.

What has changed?

The Treasury Laws Amendment (Gift Cards) Bill 2018 (Cth) (Bill) passed the Australian Parliament on 18 October 2018. The Treasury Laws Amendment (Gift Cards) Act 2018 (Cth) amends the Australian Consumer Law (ACL) to introduce a national regime for the regulation of gift cards.

The three key changes under the new laws are:

Minimum expiry requirement: gift cards must have a minimum three year expiry period.
Disclosure requirements: information about the expiry of the gift card must be displayed prominently on the card itself.
Ban on post-supply fees: terms and conditions of the gift card cannot allow certain post-supply fees to be charged.

A 'post-supply fee' is a fee that reduces the value of the gift card, such as administration fees for using the card. Post-supply fees do not include fees that are normally charged regardless of how someone pays for a product or service. So, for example, booking fees, a fee to reissue a lost or damaged card, and payment surcharges would not be covered by the ban on post-supply fees.

Until recently, there was no uniform national framework for the minimum length of time a gift card must remain valid. The new gift card laws will bring the rest of Australia in line with New South Wales and South Australia.

In October 2017, the NSW Government introduced laws requiring a minimum three year expiry period for gift cards sold to consumers in NSW. The South Australian Government followed soon after by introducing the Fair Trading (Gift cards) Amendment Bill 2018 (SA), which will impose a three year minimum expiry date for gift cards sold in South Australia.

Regulation-making powers have been introduced into the ACL to allow the Australian Government to make regulations to add to, or exclude items from, the definition of a 'gift card'. This will enable the Government to readily exempt certain gift cards from some or all of the new requirements. The regulation-making power will enable the Government to respond swiftly to changes in technology and product offerings, ensuring the definition of a gift card remains fit for purpose.

Who is responsible for enforcing the laws?

The Australian Competition and Consumer Commission (ACCC) will be responsible for enforcing the new laws. It will have access to the range of remedies in Chapter 5 of the ACL to address any misconduct. For example, the ACCC may bring legal proceedings seeking an injunction order to stop a person from supplying non-compliant gift cards for a specified time period.

The ACCC also has the ability to apply to a court for an adverse publicity order, which would require a person to make public certain information specified by the order.

What penalties will apply?

Once the new laws come into effect, if a non-compliant gift card is supplied to consumers, a penalty of up to $30,000 may be imposed on a body corporate and up to $6,000 on persons other than a body corporate.

In addition, the ACCC has the ability to impose infringement notices. Each infringement notice is 55 penalty units (currently $11,500) for a body corporate, and 11 units (currently $2,420) for persons other than a body corporate.

Next steps

Although the changes will come into effect on 1 November 2019, businesses should start preparing now to comply with the new national regime. In particular, they should take steps to ensure that:

they sell all remaining stock of non-compliant gift cards between now and 1 November 2019;
production of gift cards is reviewed to ensure that all new cards comply with the new laws, including the disclosure requirements;
post-supply fees are not charged; and
internal systems and compliance manuals are updated to comply with the new laws.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.