Christmas is close and, for many, this is the most vital time of year for your business.
As you prepare your festive offerings for your customers, you may be relying upon gift cards to be one of your biggest selling products over the holiday season.
And you’re not alone. Gift cards are rapidly gathering steam, with an increase of 25% growth within the last 5 years in Australia, and an annual estimated value between $1.5 billion and $2.5 billion. That’s a huge amount!
However, if your business is offering gift cards, there are some new legal changes that you need to be aware of.
As of 1 November 2019 inclusive, gift card laws have changed. The Australian Consumer Law has introduced more protections for gift card consumers across Australia.
It’s important that, no matter how small or large your business is, you get your head around the new gift card laws and ensure you’re meeting your obligations.
Why Should My Business Use Gift Cards?
Gift cards are great for consumers and businesses alike! You may be considering or already using gift cards for the following reasons:
- To increase recognition of your business. Gift cards are free advertising. When one person buys your gift card, they are passing it on to another, thus expanding your customer base.
- To add value to your business. In order to use the entire value of the gift card, consumers will often have to make multiple visits to your website or physical store location. This means that they may very well end up spending more than the original value of the gift card at your business!
- To support the image of your business as trustworthy and inviting. Gift cards are a fun present — they represent an experience of choice. A gift card implies that the giver trusts your business and believes it to have quality goods or experiences that they’re keen to recommend to their friends.
- To create convenience for both you and the consumer. Gift cards are quick and easy to purchase, and allow part of the decision-making to be left to the gift card recipient — taking a lot of the stress out of gift-giving!
Why Have Gift Card Laws Changed?
The Australian Consumer Law (ACL) is a national law that exists to protect the consumer. One of these ways the ACL protects consumers is through guaranteeing the consumer certain rights when purchasing goods and services.
Previously, businesses across Australia were able to set their own expiry date on gift cards.
This led to huge wastage and disparity among gift cards, with research finding $148 million was wasted by consumers in Australia last year (or around $77 per person) through not redeeming gift cards.
The new gift card laws give the consumer greater protections than before, through streamlining expiry dates across Australia and giving the consumer certain guarantees. More information can be found on the Australian Consumer Law website.
How Have The New Gift Card Laws Changed?
The new gift card laws came into effect from 1 November 2019 all across Australia.
They contain three key stipulations for businesses:
- Gift cards must have a minimum three year expiry period
- The expiry period has to be prominently displayed on the gift card
- Your business’ terms and conditions can’t allow for ‘prohibited post-supply fees’ to be charged. You also can’t demand or receive a payment of a post-supply fee.
Let’s break it down!
Gift cards must have a minimum three year expiry period
This date starts from when you sell the gift card, which is otherwise known as the ‘supply date’.
If you want to have an expiry period longer than 3 years, or if you don’t want to set an expiry date at all, that’s completely fine, too!
NSW Fair Trading introduced this 3 year minimum expiry to most gift cards in NSW back in March 2018. But for other states, these new laws are essential to get on top of.
The expiry period has to be prominently displayed on the gift card
How can you ensure your gift cards properly comply with the requirement to prominently display their expiry date?
To satisfy this requirement, at the very minimum, you need to state at least the month and year of expiry on the gift card.
Let’s say, for example, that a customer bought the gift card on 5 December 2019. To prominently display the expiration date, if you’re setting the minimum 3 year expiry period, you could simply write on the card: “Supply date: 5/12/19. This card will expire in 3 years.”
If there is no expiry date, or if the card expires after a period longer than 3 years, this needs to be written on the gift card, too.
What are prohibited post-supply fees?
These are fees such as account keeping or activation fees. They don’t include things like booking fees, replacement gift card fees, fees for exchanging currencies, or payment surcharges.
What Do I Need To Do To Comply With The New Gift Card Laws?
You need to make sure your business is complying with these new gift card laws to avoid getting a penalty or fine.
According to Australian Consumer Law, you should update your gift card terms and conditions on your website, the physical and online gift card, promotional material, internal systems, training and compliance manuals, signage on gift card displays and at point of sale.
You’ll also need to make a note of the changes in your terms and conditions on any receipt issued when a gift card is purchased.
Importantly, even if you didn’t know about the changes, the new gift card laws still apply.
This means anything you wrote on any cards issued on or after 1 November 2019 won’t apply if it doesn’t comply with the new laws.
For example, let’s say you issued a gift card on 5 November 2019 with an expiry date of 12 months from the date of purchase written on the gift card. This is now void, and the consumer will have 3 years from 5 November 2019 to use the gift card.
What About Gift Cards My Business Issued Before 1 November 2019?
No worries, the new laws don’t affect these. The original expiry date you set on the card will still apply!
Does The Three Year Expiry Apply To All Gift Cards?
No, the 3 year expiry period doesn’t apply to all gift cards.
Some examples of gift cards that are exempt from these new rules include:
- Gift cards that are redeemable for a good or service that is only available for a specified time, like a ticket to see a concert.
- A gift card for a particular good or service that is supplied at a genuine discount on the market value. For example, a ‘particular good or service’ could be getting a wheel alignment on your car. In comparison, a ‘non particular service’ would be a voucher up to a certain amount to have any part of your car serviced. A gift card could thus avoid the 3 year minimum expiry if you offered a $50 wheel alignment that was normally valued at $90, for instance.
The new changes also don’t apply to gift cards that were supplied to a charity or not-for-profit.
There are various other exceptions to these new gift card rules — you can find a full list here.
What Doesn’t Count As A Gift Card?
Things that don’t count as a gift card include articles that can only be redeemable for electricity, gas or a telecommunications service, or things that are redeemable for goods or services and can have their value increased after they are sold.
What To Take Away
If your business sells gift cards, you should update your gift card terms and conditions to be in line with the new laws, and to avoid getting a penalty.
You should also make sure all of your promotional material and business information is in line with the new minimum expiry date rules.
Sprintlaw is here to help. If you have any questions, feel free to get in touch with us at 1800 730 617 or firstname.lastname@example.org.