The sale of gift vouchers and their terms and conditions is largely unregulated in Ireland.
Although there is no specific legislation, gift vouchers provided to consumers are subject to the provisions of general consumer protection legislation, such as the Consumer Protection Act 2007.
Gift vouchers that cover a wide range of traders and retailers such as the “All4One” vouchers come within the definition of “electronic money” in the European Communities (Electronic Money) Regulations 2011 are subject to the provisions of those Regulations.
The Unfair Contract Terms (Gift Vouchers) Bill 2018 (“the Bill”)
The Unfair Contract Terms (Gift Vouchers) Bill 2018 is currently being considered by Government.
The main objectives of the Bill appear to be:
- To set a minimum term before a gift voucher can expire. The Bill suggests a five year validity period;
- To deal with fees related to the issue and replacement of gift vouchers and for ‘inactive balances’ (commonly referred to as dormancy/maintenance fees) on gift vouchers.
While the Bill has been welcomed by consumer groups, its scope should have been extended to further protect consumers. For example, the Bill fails to legislate for how outstanding vouchers are dealt with if a company becomes insolvent.
Currently, a voucher holder is classified as an unsecured creditor in a winding up and is, therefore unlikely to recover any of the value of their gift cards in a liquidation.
It is also difficult for a liquidator to know who has a claim against the company and the value of that claim until it is submitted. This is particularly the case in circumstances where vouchers are usually issued without retaining any customer identification. The administrative burden of processing these claims may be in excess of the value of the voucher itself and at the expense of all of the creditors.
The most alarming feature of gift vouchers is that there is no current requirement for companies to retain a separate bank account to hold the money received from the sale of gift cards. Generally, the money is used by companies as available funds in the running of the business.
The Minister could have used the opportunity to implement a system whereby a company would keep a record of names and would transfer voucher monies into a trust fund like account. In that case the funds would be isolated and kept separate for the benefit of the beneficiaries of the voucher. In the alternative, a unique serial number might attach to individual vouchers. On production of the voucher, a liquidator would then be in a position to identify the funds pertaining to it.
In that scenario, the sale of the voucher would not be recorded as “sales revenue” until the voucher is redeemed. Only at this stage should the voucher monies be removed from the trust account into the general trading bank account.
This would provide voucher holders with a preferential status in a winding up which would be a huge improvement on their current position.
Of course, the legislation would also have to implement a minimum value for any claim. This sum would need to balance consumer protection and the onerous task of identifying claims and arranging refunds.
It is hoped that the issue of gift vouchers in the context of insolvency will be further debated before the enactment of any legislation.