Does your business provide gift cards or gift vouchers to NSW consumers? If so, you should be aware of the new laws relating to gift cards which took effect on 31 March 2018.
What are the changes?
All gift cards and gift vouchers sold to consumers in NSW after 31 March 2018 must now have a minimum expiry period of 3 years from the date of sale to the consumer. In addition to the mandatory minimum expiry period, there is now a ban on charging any post-purchase administration fees associated with redeeming gift cards that would reduce their value. Post-purchase administration fees include for example – activation fees, account keeping fees, balance enquiry fees, telephone enquiry fees and inactivity fees. Fees such as overseas transaction fees, booking fees or payment surcharge fees are still valid.
What happens to gift cards that were issued prior to 31 March 2018?
The new laws do not have retrospective effect. Accordingly, the applicable expiry dates and post-purchase fees which applied to gift cards or gift vouchers which were sold prior to 31 March 2018 will still be enforceable.
There is a practical transition period between 30 March to 30 September 2018 during which businesses can run down their existing stock of pre-printed gift cards which may have invalid terms printed on them. When selling the pre-printed gift cards a business must take steps to inform customers that the cards come with a 3 year expiry and that no post-purchase fees apply (despite what might be printed on the cards).
Do the new laws apply to all gift cards sold to NSW consumers?
No. Excluded cards include the following:
What about gift cards sold online?
- A gift card or voucher that is given by a business for free to a consumer
- A gift card or voucher exchanged for goods returned to the supplier of the goods
- Gift cards supplied as part of a customer loyalty or employee rewards program
- A gift card or voucher supplied as part of a temporary marketing promotion as a bonus to the purchase of a good or service
- A gift card or voucher sold for a particular good or service that is below the market value of the good or service (a genuine discount)
- A gift card or voucher sold or donated for use in a fundraising appeal, including to a charity or not for profit organisation
- A gift card or voucher for a good or service available for a limited time where the card or voucher expires at the end of that period (for example, entry to a concert or museum exhibition, or a pair of shoes that is only available for a limited time)
- Prepaid cards for phone credit or internet access
- ATM cards, debit cards, credit cards or charge cards
- A reloadable card that uses EFTPOS, Visa or Mastercard or a similar electronic payment system
The new laws apply to gift cards or gift vouchers sold (whether in person or online) to a consumer who is in NSW at the time of sale or sold to a consumer who provides a NSW address in connection with the sale.
Accordingly, if a consumer provides any address
at the point of sale that is outside NSW the gift card is not required to carry a 3-year expiry date. However, if there is any doubt as to a consumer’s location we recommend erring on the side of caution and complying with the new laws in respect of the gift card.
What are the penalties for non-compliance?
Businesses can attract a penalty infringement notice of $550 and a maximum penalty of $5,500 for a breach of the new laws.
In assessing whether to take enforcement action, NSW Fair Trading will consider the nature and extent of the actions a business has taken to inform its consumers of the new laws.
What are some practical steps to ensure your business is complaint with the new laws?
- Train your staff so they are aware of the new laws – update your IT platforms, compliance manuals and carry out structured staff training.
- Alert customers of pre-printed gift cards of the 3 year expiry date and no post-purchase fees – this can be done by physically amending the cards at the point of sale, making a hand written note on the receipt of purchase, updating your terms + conditions of sale and/or installing signage at the physical location of pre-printed gift cards to notify of the changes.
- Discuss with your accountant how the extended expiry periods will affect your revenue recognition for gift card sales (if at all).