On 31 March 2018, the New South Wales Government’s new laws for the issue and redemption of gift cards and vouchers will come into effect. The most important changes are the introduction of a mandatory minimum three year expiry period, and a ban on all post-purchase administrative fees associated with using the gift card. According to Matt Kean, NSW Minister for Innovation and Better Regulation, the new laws are aimed at putting consumers first by providing greater certainty and fairness within the gift card industry.
Application of the new laws
The new gift card laws have been introduced through amendments to various NSW fair trading legislation and will supplement the existing regulation of gift cards found in the Corporations Act 2001 and regulations published by ASIC.
A ‘gift card’ is defined as ‘a card or voucher (in hard copy or electronic form) that is redeemable for goods or services in New South Wales’ – which is a wide definition. However, the legislation does exempt certain cards and vouchers from the laws. Exempt cards and vouchers include (non-exhaustively):
- prepaid cards for phone credit or internet services
- cards supplied in substitution for returned goods
- cards supplied as part of a customer loyalty program or temporary marketing program
- reloadable prepaid cards.
The new laws apply to the sale of gift cards to New South Wales customers only – that is, a customer who at the time of the sale is in New South Wales or who provides a New South Wales address. If the gift card is sold over the phone or online (either in Australia or internationally) and the gift card is sent to an address outside of New South Wales, the gift card is not captured by the new laws. The new laws apply to the sale or issue of gift cards from 31 March 2018 onwards.
A breach of the laws could attract a penalty infringement notice of $550 per breach and, if pursued by NSW Fair Trading, could result in a maximum penalty of $5,500 per breach. Importantly, if problems with gift cards are systemic (rather than one-off), then penalties for businesses that sell large numbers of gift cards could be very high.
The legislation includes a transitional period – 31 March 2018 to 30 September 2018 – to allow businesses time to comply. Businesses can sell any existing stock of non-compliant gift cards up to 30 September 2018. However they must inform consumers of the new laws, and that the gift cards will be honoured for at least three years (despite any non-compliant labelling stating otherwise).
Businesses can use the transition period to print correctly labelled cards and vouchers, correct card terms and conditions, re-print advertising and marketing materials, and adapt their operational requirements, including updating IT platforms, compliance manuals and staff training, to comply with the new laws.
Importantly, the prohibition on post-purchase administrative fees applies immediately from 31 March 2018.
What action is required to address the new laws?
All businesses that sell or supply gift cards or vouchers to customers in New South Wales must act now to address the new laws. The new laws are not confined to businesses in New South Wales: they apply to businesses across Australia and internationally to the extent that those businesses sell or supply gift cards to customers located in New South Wales.
What action is required? We recommend that you:
- Undertake a thorough audit of what cards and vouchers are issued by the business, and whether they fall within the ambit of the new laws.
- Consider whether a consistent national approach should be taken to the supply of gift cards to customers, irrespective of the location of the customer.
- Assess current stock of gift cards and vouchers, and make changes to correct any non-compliant labelling, including non-compliant expiry dates (an expiry date of at least three years must be applied).
- Ensure that appropriate messages are given to customers about the redemption of gift cards.
- Review and correct gift card terms and conditions, advertising and marketing, point of sale material.
- Provide staff training, and update staff manuals.
Remember that the new laws supplement existing regulation applicable to the supply of gift cards. We recommend businesses check that all applicable conditions and restrictions on the use of the gift card or voucher are compliant with all laws.
New South Wales Fair Trading has developed resources that businesses can use at the point of sale to inform customers of the new laws, as well as guidance about best practice approaches businesses can take to ensure they are compliant during, and after, the transition period. These resources can be accessed on the NSW Fair Trading website.