Following swiftly from legislation introduced in New South Wales (please click here to view our previous alert), the Australian Government has released for public consultation the draft Competition and Consumer Amendment (Gift Cards) Bill 2018 (Bill) to regulate the issue of gift cards nationally (the exposure draft and explanatory materials are available here).
There is currently no uniform national regulation regarding the minimum period of time a gift card should be valid. The Government estimates that losses experienced by Australian consumers from gift card expiry are approximately AUD 70 million a year.
What is being proposed?
The Proposed Bill:
- mandates a minimum expiry date for gift cards;
- requires expiry dates to be prominently displayed on gift cards; and
- bans the charging of post-purchase fees on gift cards.
Minimum expiry date
A gift card must be redeemable for at least 3 years from the date it is supplied. Any card supplied with an expiry period of less than this will be deemed to expire 3 years after date of sale of the card.
Display expiry dates
Gift cards must prominently display expiry dates. Displaying the expiry period on a separate document at the point of sale will not be sufficient, as the purchaser may not necessarily be the user of the card. Where the month and year of expiry are displayed, the expiry date will be deemed to be the last day of the month. If the gift card does not expire, that must be stated on the gift card (for example, the card should include the wording "no expiry date", "does not expire", or similar).
Ban on post-purchase fees
A business cannot require consumers to pay a fee or charge in relation to a gift card after the card has been supplied. These fees erode the balance of the card over time and may operate as a de facto expiry date.
However, the ban would not cover any fees a business may charge to recover the costs of settling individual purchases made by consumers through payment systems. An exhaustive list of fees that can be charged will be set out in regulations. A Consultation Paper issued by the Government in July 2018 states that these would include:
- fees or charges for making a booking;
- fees or charges for disputing a transaction;
- foreign currency transaction fees or charges; and
- fees or charges for the reissue of a gift card that has been lost, stolen or damaged.
Businesses would continue to be able to charge an upfront fee when a consumer purchases a gift card.
Gift card terms and conditions that allow or require post-purchase fees to be charged or impose an expiry period of less than 3 years will be void. In addition, penalties of up to AUD 30,000 may be imposed on a body corporate (AUD 6,000 for other persons) for breaching the new requirements.
The Australian Competition and Consumer Commission will regulate the new requirements and will have access to its usual range of remedies where a business is found to be in breach, including injunctions, adverse publicity orders and infringement notices.
Who will need to comply with the Bill?
The new requirements will apply to businesses who supply gift cards in trade or commerce within Australia. This may not be the person who gives the card to the end user. For example, an employer who purchases gift cards from a business and gives them to its staff will not be considered to be supplying in trade or commerce.
A gift card is defined as an article commonly known to be a gift card or voucher, whether in physical or electronic form, that is redeemable for goods or services. Items such as the following would therefore not be considered a gift card:
- credit, charge and debit cards;
- bus tickets;
- travellers cheques;
- travel cards;
- digital currency;
- stamps; and
- discount coupons and vouchers.
The Government proposes to issue regulations to add or exempt items from the definition of a gift card (or to add or exempt certain people or circumstances from the operation of the Bill). The Consultation Paper indicates that exemptions are likely to include the following:
- reloadable pre-paid cards;
- cards or vouchers redeemable for electricity, gas and telecommunications;
- cards or vouchers for time-limited goods and services (e.g. one-off, time-bound events such festivals or as temporary exhibitions); and
- cards and vouchers issued for temporary marketing purposes (e.g. a card provided as a gift with purchase for use at the same business).
Federal vs State law
The Bill is largely similar to the gift card legislation that came into force in New South Wales on 31 March 2018 (see our article discussing those laws here) and the bill recently proposed by the South Australian Parliament. All three pieces of legislation provide for a mandatory minimum 3-year expiry period and prohibit post-purchase fees on use of gift cards.
There are some differences between the State legislation and the federal Bill, for example under the Bill:
- businesses that "supply gift cards in trade or commerce" are caught, whereas the State legislation is narrower, capturing businesses that "sell" gift cards;
- there is an additional requirement for expiry dates to be prominently displayed on the gift card itself; and
- there are higher penalties - up to AUD 30,000 for a body corporate (compared to up to AUD 5,500 under the New South Wales legislation or AUD 5,000 under the South Australian bill).
The extent of the exemptions to the federal Bill will not be clear until the Government issues draft regulations.
What do you need to do?
All businesses that sell gift cards to consumers in New South Wales must comply with the requirements under the New South Wales Fair Trading Act 1987. The broad reach of this legislation (i.e., a business does not need to be based in the State, just selling gift cards to someone who is) means that many Australian businesses will already be taking action to bring their gift card practices in line with the new law. Businesses selling gift cards in South Australia will also need to monitor the progress of the South Australian bill as this is expected to become law, and the compliance requirements to commence, fairly soon.
Irrespective of a customer's location, all businesses that supply gift cards in Australia will need to comply with the Federal Bill once it becomes law on 1 November 2019. While businesses that are already compliant with the New South Wales (and/or South Australian) law will have a head-start, it will be important to be aware of the additional compliance requirements at the Federal level.