New mandatory minimum 3 year term for gift cards sold to NSW consumers

Important new changes are set to apply from 31 March 2018 for businesses who sell gift cards or gift vouchers to NSW consumers. The new laws affect not only NSW based businesses but also any business that sells gift cards to NSW consumers online (including international websites). Understanding consumers’ new rights, and adopting new business practices will be critical to your compliance with these new reforms.

Background

Late last year, the New South Wales government introduced a new three year mandatory minimum expiry period for gift cards and vouchers sold to NSW consumers via an amendment to the Fair Trading Act 1987.  The stated purpose of the reforms is to strike a fairer balance between consumers and businesses in the gift card market by ensuring consumers have sufficient time to receive the full value of their gift cards while also giving certainty to businesses in accounting for gift cards.

The reforms come into effect on 31 March 2018. Information about interim arrangements for existing pre-printed gift cards has just been released. In this article we help you get your business ready to comply with the new laws.

How will these new laws affect my business?

You should read this article and review your terms of sale  if you sell to NSW consumers, regardless of whether you have a physical presence in that State.

The 3 year expiry date is a minimum requirement only, and gift cards can extend beyond this timeframe or have no expiry date.  Maximum penalties of $5,500 apply for non-compliance. Misstating a consumer’s legal rights to use and enjoy the benefits of a gift card could also land you in trouble for breaching the Australian Consumer Law.

When is a gift card issued to a consumer in NSW?

The new laws apply to gift cards issued to a consumer in NSW.  This means that if the gift card is purchased in-store in NSW by any person, or purchased online where the only address(es) provided by the customer is a NSW address, the gift card must be valid for at least 3 years.

Where a customer purchases a gift card online and provides a non NSW address (contact/billing address or delivery address), the new minimum expiry date laws will not apply.  For example, if a customer purchases a gift card online and provides a Victorian address as the billing address and provides a NSW address as the delivery address, the new laws will not apply.  Similarly, if an online consumer with a NSW billing address purchases a gift card to be delivered to a non NSW recipient, the new reforms will not apply.

Where no address is provided by an online customer , the safest approach is to ensure the gift card is valid for at least 3 years.

What cards are excluded under the new laws?

There are numerous exceptions to the new reforms. For example, the new minimum 3 year expiry date does not apply to:

    • • Cards or vouchers issued as an exchange for goods returned (also known as credit notes).
    • • Cards issued as part of a customer loyalty program (such as “rewards”), supplied as part of a temporary marketing promotion or donated for use in a fundraiser.
    • • Reloadable prepaid cards and cards or vouchers for phone, internet or access to other utility services.
    • • Cards or vouchers that are redeemable for a good or service available for a limited time only (such as entry to an exhibition) or sold at a genuine discount on the market value of the good or service.

Interim arrangements for existing gift card stock

NSW Fair trading has now confirmed a transitional period, from 31 March 2018 until 30 September 2018, for businesses to review and update their processes and to ensure their compliance with the new laws. During this period, businesses can continue to sell their existing stock of gift cards and packaging which are labelled with shorter expiry dates, and were printed or awaiting distribution before 31 March 2018, provided they take appropriate action to inform customers about the new laws and provided these cards are honoured for at least 3 years.

NSW Fair Trading has provided guidance about best practice for compliance and alternative actions businesses may take during this transition period.  This includes:

    • • physically amending old expiry dates on cards;

• updating your business terms and conditions;

• implementing signage or flyers informing customers of the changes; and

• noting the changes on receipts or accompanying material provided with gift cards/vouchers.

Businesses should also review their accounting policies in order to account for longer gift card liabilities as a result of these changes.

Buchanan Legal Services can assist you in reviewing and updating your gift card terms and policies to ensure ongoing compliance with the new mandatory gift card expiry date regime and also other recent legal reforms such as those prohibiting the use of unfair terms in consumer contracts. You can contact us on (03) 9596 8495 or at hello@bchn.com.au.

This article is provided by way of general information only and is not legal advice. Always obtain your own independent legal advice tailored to your business’ particular circumstances before making decisions relating to the legal issues referred to above. In this regard, we’re here to help.