Over this past summer, the highly anticipated Ontario gift card regulations (O.Reg.17/05 amended to O.Reg.187/07) to the Consumer Protection Act (as amended) (CPA) were released. The regulations, which came into force on October 1, 2007 describe the specific restrictions on and requirements for the supply of gift cards by retailers and other suppliers. The regulations also clarify the recourse available to consumers when gift card suppliers do not comply.
Prohibitions and Required Disclosure
Specifically, expiry dates on most “gift cards,” including pre-paid and reloadable gift cards and gift certificates issued in any amount, are prohibited. No fees including dormancy or inactivity charges (with some exceptions) are permitted and a supplier may not issue a gift card valued at less than the amount the consumer paid for it. Furthermore, certain minimum disclosure requirements must be met by the supplier. These include the disclosure of any fees permitted under the regulations and all restrictions, limitations and conditions imposed on the use of the gift card. These disclosures must be in writing and delivered to the consumer, which typically means that such information will be disclosed directly on the gift card or otherwise made clearly visible at the point of purchase.
Cancellation and Refund
Failure of a supplier to disclose the required information entitles the consumer to cancel the gift card and to receive a refund of the outstanding balance for up to one year after the gift card was issued. Similarly, if the consumer is charged a fee or an amount not otherwise permitted, the consumer is entitled to a refund of the fee for up to one year provided that notice is given to the supplier as required under the CPA.
Application of Regulations
The regulations apply to most gift cards issued by a supplier; however, some gift cards (for example, those issued for a charitable purpose or for a specific good or service) are not regulated. In addition, gift cards redeemable at multiple unaffiliated stores (such as in a shopping mall) will be temporarily exempt from the fee prohibition for a period of 270 days while the government considers regulatory options for these types of cards.
Recent Developments in Other Provinces
British Columbia Legislation
Since our last issue, Private Members’ Bill M219 (The Business Practices and Consumer Protection Act) was introduced in British Columbia and received first reading in May 2007. The Bill proposes to amend B.C.’s consumer protection legislation to regulate gift cards. The main function of Bill 219 appears to be the prohibition of expiry dates and any and all fees and dormancy or inactivity charges on gift cards.
Unlike legislation in other provinces, Bill M219 requires that where a consumer uses a gift card to make a purchase that is less than the value of the gift card, he or she is entitled to a refund of the remaining value either in cash or as a gift card. Where the remaining value is less than five dollars, the gift card must be redeemable in cash for its remaining value upon demand by the consumer.
More recently, in Manitoba, The Consumer Protection Amendment Act (Prepaid Purchase Cards), which proposes amendments that will regulate gift cards, has been proclaimed to come into force on November 1, 2007. Regulations concerning gift cards were also released and, for the most part, mirror many of the restrictions and requirements in Ontario. Most fees are prohibited although there are some exceptions; for example, fees are permitted if the holder provides nothing of value for the card when it is issued.
Concerning gift cards that can be used at multiple unaffiliated stores, Manitoba permits a maximum monthly fee of $2.50 if the card has not been activated within one year. Similar cancellation and refund provisions are contained in the Manitoba regulations, as well as similar minimum disclosure requirements. There is, however, an additional requirement to disclose how the gift card holder may obtain information about the card, including any remaining balance. There is also a similar prohibition against the use of expiry dates on the card, with some exceptions. Finally, the regulations provide for administrative penalties where a supplier of a gift card fails to meet certain requirements.
Nova Scotia Bill 133
To date, there have been no further developments concerning Nova Scotia’s Private Members’ Bill 133, Consumer Protection Act (amended) which was introduced in January, 2007. If passed, Bill 133 would permit the implementation of regulations imposing restrictions, including the regulation or prohibition of expiry dates on gift cards.
We continue to monitor developments in this area in Canadian jurisdictions and will provide updates in future issues of the Osler Franchise Review.