Commonwealth of Australia Explanatory Memoranda Commonwealth of Australia Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
2016-2017-2018
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
TREASURY LAWS AMENDMENT (GIFT CARDS) BILL 2018
EXPLANATORY MEMORANDUM
(Circulated by authority of the
Assistant Treasurer, the Hon Stuart Robert MP)
Table of contents
Glossary................................................................................................. 1
General outline and financial impact ...................................................... 3
Chapter 1 National gift card reforms ............................................. 5
Chapter 2 Regulation impact statement ..................................... 15
Chapter 3 Statement of Compatibility with Human Rights .......... 59
Glossary
The following abbreviations and acronyms are used throughout this
explanatory memorandum.
Abbreviation Definition
ACL Australian Consumer Law; Schedule 2 to the Competition
and Consumer Act 2010
ACCC Australian Competition and Consumer Commission
ASIC Australian Securities and Investments Commission
ASIC Act Australian Securities and Investments Commission Act
2001
Bill Treasury Laws Amendment (Gift Cards) Bill 2018
CCA Competition and Consumer Act 2010
Corporations Act Corporations Act 2001
1
General outline and financial impact
National gift card reforms
The Bill amends the ACL to introduce a national regime that requires gift
cards have a minimum three year expiry period and disclosure of expiry
information on gift cards and bans certain post-supply fees.
Date of effect: The day after the Bill receives Royal Assent.
Proposal announced: The Bill implements the gift card reforms
announced on 19 June 2018 by the then Assistant Minister to the
Treasurer, the Hon Michael Sukkar MP.
Financial impact: Nil
Human rights implications: The Bill is compatible with human rights,
and to the extent that it may limit human rights, those limitations are
reasonable, necessary and proportionate. See Statement of Compatibility
with Human Rights -- Chapter 2, paragraphs 2.1 to 2.8.
Compliance cost impact: A minimum three year expiry period is
estimated to result in annual compliance costs of $9.4 million. These costs
include modifications to computer and accounting systems, reprinting and
staff training costs.
Summary of regulation impact statement
Regulation impact on business
Impact: The reforms will impose compliance costs of $9.4 million
per year, as businesses will need to update their systems to comply with
the new regime and will need to disclose gift card expiry dates on an
ongoing basis. Consumers will benefit by having a reasonable period of
time to use a gift card before it expires.
Main points:
• Consumers can experience disappointment and a financial
loss when a gift card expires. Nationally, there are no
uniform requirements for minimum expiry dates on gift
cards, creating complexity for consumers and businesses.
• The Regulatory Impact Statement (RIS) examined options to
reform gift card expiry dates to achieve a uniform national
approach for gift cards. The three policy options were:
- Option 1 - the status quo;
3
Treasury Laws Amendment (Gift Cards) Bill 2018
- Option 2 - prohibition on gift card expiry dates; and
- Option 3 - three year minimum expiry dates.
• Option 3 was the preferred option as it has the highest net
benefit.
• Introducing a minimum three year expiry period for gift
cards will involve some short term transitional costs for
businesses. However, it avoids the ongoing compliance costs
and uncertainty for businesses associated with not having a
national approach.
• Introducing a minimum three year expiry period for gift
cards also improves fairness for consumers, ensuring they
have an appropriate period of time to redeem the balance of a
gift card.
4
Chapter 1
National gift card reforms
Outline of chapter
1.1 The Bill amends the ACL to introduce a national regime for the
regulation of gift cards. This regime provides that gift cards must have a
minimum three year expiry period, expiry information must be disclosed
and certain post-supply fees are banned.
Context of amendments
1.2 Gift cards are sold across Australia by a range of businesses,
both large and small. One of the commonly used terms and conditions of
gift cards are expiry dates. Of the gift cards sold a certain percentage are
not redeemed before they expire.
1.3 Many consumers experience the disappointment of an expired
gift card, the most recent estimated losses from gift card expiry are
considered to be in the order of $70 million annually. When a gift card
expires before it can be used a consumer experiences the personal
detriment from the loss of value on a gift card. Some recipients of gift
cards are not aware of the expiry dates for gift cards they are given. In
these circumstances those consumers expect their gift cards to last for a
reasonable time.
1.4 There is currently no uniform national regulation for the
minimum length of time a gift card should be valid. On 18 October 2017,
New South Wales (NSW) Parliament passed the Fair Trading Amendment
(Ticket Scalping and Gift Cards) Act 2017 (NSW) (the NSW Act). The
NSW Act, which commenced on 31 March 2018, introduced a minimum
three year expiry for gift cards sold in NSW.
1.5 Similarly, the South Australian Parliament recently introduced
the Fair Trading (Gift cards) Amendment Bill 2018 (SA) to impose a three
year minimum expiry date for gift cards sold in South Australia.
1.6 The national regime requires gift cards to have a minimum three
year expiry period - providing consumers with a reasonable period to use
the value on the card before it expires.
1.7 To ensure that consumers are aware of the expiry date of the
card, the national regime also requires expiry information be prominently
displayed on the card. This is largely consistent with industry practice,
with the majority of gift cards already displaying this information.
5
Treasury Laws Amendment (Gift Cards) Bill 2018
1.8 The national regime will also prohibit gift card suppliers from
charging certain post-supply fees, which can erode the balance on a gift
card over time and operate as a de facto expiry date.
Summary of new law
1.9 The Bill amends the ACL to provide that:
• gift cards must have a minimum three year expiry period;
• information about the expiry of the gift card must be
displayed prominently on the card itself;
• terms and conditions cannot allow certain post-supply fees to
be charged; and
• certain fees cannot be charged after a gift card is supplied.
1.10 The amendments apply to gift cards supplied on or after
1 November 2019.
Detailed explanation of new law
1.11 The ACL does not apply to financial services and products,
which are instead regulated by the ASIC Act and Corporations Act. The
Bill amends the ACL so that even if certain gift cards are a financial
product, they are also regulated by the ACL for the purposes of these
reforms. [Schedule 1, item 1, subsection 131A(1) of the CCA]
Requirements when supplying gift cards
1.12 The obligations relating to expiry, disclosure and the restriction
on terms or conditions imposing post-supply fees imposed by the national
reforms sit with a person who, in trade or commerce, supplies a gift card
to a consumer. This is not necessarily the person who first sells the gift
card or the person who gives the gift card to the end user. [Schedule 1, item 6,
sections 99B, 99C and 99D of the ACL]
Supply in trade or commerce
1.13 Supply of goods is defined in section 2 of the ACL. In relation
to gift cards, it generally means sale and exchange. This would include the
use of rewards points to acquire a gift card.
1.14 Subsection 5(1) of the ACL provides that a donation of goods is
taken to be a supply where the donation is for promotional purposes.
Donation and promotional purposes are not defined.
1.15 Businesses donating gift cards, for example to be used as prizes
or to charities, would generally be considered to be doing so for
6
National gift card reforms
promotional purposes. As such, those companies would be making a
supply under section 5 of the ACL and the obligations would apply to
them.
1.16 Section 2 of the ACL also defines trade or commerce. It includes
any business or professional activity and does not require a profit making
motive.
1.17 A government agency or benevolent organisation providing gift
cards to individuals experiencing financial or personal hardship would
generally not be considered to be engaging in trade or commerce.
1.18 Whether or not a charity is engaging in trade or commerce
depends on the circumstances. The ACCC's A guide to Australian
consumer law - for fundraising and other activities of charities,
not-for-profits and fundraisers (December 2017)1 provides some guidance
on this issue.
Definition of consumer
1.19 Consumer as currently defined in section 3 of the ACL does not
include a person who has acquired a good for the purposes of re-supply.
1.20 The Bill amends the definition of consumer so that as long as a
gift card is not acquired to re-supply in trade or commerce, the person
acquiring the card is considered to be a consumer. [Schedule 1, item 5,
paragraph 3(2)(a) of the ACL]
1.21 This means that, for example, when a gift card is bought for the
purpose of providing as a gift and other non-business use the purchaser
will be considered a consumer and the transaction will be covered by the
reforms.
Example 1.1
Sally-Anh purchases gift cards from XYZ Pty Ltd to give to her family
and friends for their birthdays. The requirements would apply to XYZ
Pty Ltd when they supply the gift cards to Sally-Anh. As Sally-Anh is
not engaging in trade or commerce the requirements do not apply to
her.
Example 1.2
Nice Employer Pty Ltd buys gift cards worth $10,000 from XYZ Pty
Ltd and gives them to their employees as a Christmas bonus. Nice
Employer Pty Ltd would be treated like a consumer for the purpose of
this transaction as they are not re-supplying the gift cards in trade or
commerce.
XYZ Pty Ltd must ensure it meets the requirements when supplying
the gift cards to Nice Employer Pty Ltd.
1
https://www.accc.gov.au/system/files/guide_acl_fundraising-1.pdf
7
Treasury Laws Amendment (Gift Cards) Bill 2018
As Nice Employer Pty Ltd is not providing the gift card to its
employees in trade or commerce the requirements do not apply to
them.
Example 1.3
Wholesaler Pty Ltd sells 1,000 gift cards to Retailer Pty Ltd. Retailer
Pty Ltd has purchased the gift cards to re-supply in trade or commerce
(i.e. as part of their business). As such, Retailer Pty Ltd is not
considered as a consumer and the requirements will not apply to
Wholesaler Pty Ltd for the purposes of this transaction.
Retailer Pty Ltd then sells the gift cards to individuals and other
businesses to use themselves or to gift to others (i.e. not to re-supply in
trade or commerce). The requirements will apply to Retailer Pty Ltd as
they are supplying gift cards to consumers in trade or commerce.
Example 1.4
Company ABC provides free gift cards to a small school to be used as
prizes in raffles. The company logo is displayed on the ticket books
and on advertising materials. Company ABC would be considered to
have made the donation for promotional purposes.
The school does not regularly run raffles or organised fundraising
activities. In this circumstance, the school is not considered to be
engaging in trade or commerce. They would be considered a consumer
who is not re-supplying the gift cards in trade or commerce.
Company ABC would be making a supply in trade or commerce to a
consumer when giving the gift cards to the school and the requirements
would apply to them. The requirements would not apply to school.
Definition of gift card
1.22 A gift card is defined to mean an article that is commonly
known to be a gift card or voucher, whether in physical or electronic form
and is redeemable for goods or services. [Schedule 1, items 4 and 6,
subsection 2(1) and section 99A of the ACL]
1.23 Gift cards may be redeemable in a single store or across multiple
different businesses. They are generally defined with reference to a dollar
amount or as being redeemable for a specific good or service and cannot
have additional value added to them after they have been supplied. Gift
cards are also generally not redeemable for cash beyond a minimal
amount in change.
1.24 Items that are not commonly known to be a gift card include:
• credit, charge or debit cards;
• public transport tickets;
• buy a certain number, get one free-style customer loyalty
cards (e.g. coffee cards); and
8
National gift card reforms
• discount offers and advertising material.
These items are therefore not captured by the new national regime.
Cashless welfare cards provided by government agencies are also not
considered to be gift cards.
1.25 Items do not have to be only promoted as a gift product to be
captured (as is required to obtain relief under ASIC Corporations
(Non-cash Payment Facilities) 2016/211). Gift cards can be purchased for
use by the purchaser and do not have to be gifted to others. For example,
people may choose to buy gift cards when they are on sale for their own
personal use.
1.26 The definition can include cards provided by suppliers to
discharge a legal liability, for example if an insurance company gives a
prepaid card to policy holders to discharge a legal liability under the terms
of an insurance policy and that card is in the same form as those available
to the general public as a gift card.
1.27 The Bill inserts a regulation-making power so that regulations
can be made to add to, or exempt items from, the definition of gift card.
[Schedule 1, item 6, section 99A of the ACL]
1.28 A regulation-making power is necessary to provide flexibility
and clarity given the difficulty in legislating a definition that applies
comprehensively to the vast range of arrangements currently in existence.
A regulation-making power will also enable the Government to respond in
a timely way to changes in technology and product offerings to ensure the
definition of gift cards remains fit for purpose. This will ensure the
reforms apply in the right circumstances and avoidance techniques can be
addressed. Regulations may be made to avoid doubt and provide certainty
to industry and consumers. Any regulations would be subject to
parliamentary scrutiny.
Three year minimum expiry period
1.29 A gift card must be redeemable for at least three years from the
date the gift card is supplied. There is no prohibition on providing a longer
expiry period. [Schedule 1, item 6, paragraph 99B(1)(a) of the ACL]
1.30 If a gift card is supplied with less than a three year expiry period
a pecuniary penalty may be imposed. The maximum pecuniary penalty is
$30,000 for a body corporate and $6,000 for persons other than a body
corporate. [Schedule 1, items 6, 8 and 9, section 99B, subparagraph 224(1)(a)(v),
subsection 224(3) (after table item 6) of the ACL]
1.31 The three year minimum expiry period does not change
consumers' rights in the event that the supplier of the gift card becomes
insolvent or bankrupt. That is, they will continue to be treated as
unsecured creditors.
9
Treasury Laws Amendment (Gift Cards) Bill 2018
Disclosure about expiry
1.32 If the gift card expires, the expiry date or the date the card was
supplied and a statement about the period of validity must be set out
prominently on the gift card itself. The date can be displayed in either the
DDMMYY or MMYY formulation. Displaying the expiry period on a
separate document at the point of sale is not sufficient as the purchaser
will not necessarily be the user of the card. [Schedule 1, item 6, section 99C of
the ACL]
1.33 For example, the following would satisfy the disclosure
requirements:
• "Supply date: March 2020. This card will expire in 3 years."
• "This card expires 5 years after supply. Supply date 15/8/20."
• "Valid for 3 years from 11/19."
1.34 Where the date is displayed as MMYY it is usual industry
practice that the card expires on the last day of the month.
1.35 If the gift card does not expire, that must be stated on the gift
card. For example, the gift card must include a statement that it 'does not
expire', 'never expires', or has 'no expiry date'. [Schedule 1, item 6,
paragraph 99C(e) of the ACL]
1.36 If the required disclosure about the expiry of the gift card is not
prominently set out on the card itself, a pecuniary penalty may be
imposed. The maximum pecuniary penalty is $30,000 for a body
corporate and $6,000 for persons other than a body corporate. [Schedule 1,
items 6, 8 and 9, section 99C, subparagraph 224(1)(a)(v), subsection 224(3) (after table
item 6) of the ACL]
Post-supply fees
1.37 Under the national regime, the charging of certain fees after the
gift card has been supplied will be prohibited. Further, a person must not
supply a gift card with terms and conditions that allow for prohibited
post-supply fees to be charged. This includes charges that are deducted
automatically without an explicit communication of the request or
demand. [Schedule 1, items 4 and 6, subsection 2(1) and sections 99D and 99E of the
ACL]
1.38 Regulations will be made to specify an exhaustive list of fees
that can be charged after a card is supplied. Using regulations in this way
allows the Government to make timely changes based on the environment
and changes to technology to ensure the list remains fit for purpose. Any
regulations would be subject to parliamentary scrutiny. [Schedule 1, item 6,
subsection 99D(2) of the ACL]
1.39 A pecuniary penalty may be imposed for contravening these
requirements. The maximum pecuniary penalty is $30,000 for a body
10
National gift card reforms
corporate and $6,000 for persons other than a body corporate. [Schedule 1,
items 6, 8 and 9, sections 99D and 99E, subparagraph 224(1)(a)(v), subsection 224(3)
(after table item 6) of the ACL]
Void terms and conditions
1.40 A term or condition is void to the extent it:
• reduces the expiry period earlier than three years; or
• allows or requires the payment of a post-supply fee.
[Schedule 1, item 6, subsection 99F(1) of the ACL]
1.41 For example, a term which requires a gift card to be activated
within 30 days or the funds are forfeited would be void. Similarly, a
condition which requires the card to be used every calendar month in
order to remain valid would be void.
1.42 The supplier of the gift card must ensure the terms and
conditions on the gift card do not include those which would be void
otherwise a pecuniary penalty may be imposed. [Schedule 1, item 6,
subsection 99F(2) of the ACL]
1.43 The maximum pecuniary penalty is $30,000 for a body
corporate and $6,000 for persons other than a body corporate. [Schedule 1,
items 6, 8 and 9, section 99F, subparagraph 224(1)(a)(v), subsection 224(3) (after table
item 6) of the ACL]
1.44 The voiding of a term or condition does not remove the liability
for an alleged contravention. [Schedule 1, item 6, subsection 99F(3) of the ACL]
Regulation-making power
1.45 Regulation-making powers have been inserted to provide for the
ability to exempt certain gift cards, persons and gift cards supplied in
certain circumstances from all or some of the requirements imposed by
these reforms. [Schedule 1, item 6 and 7, sections 99G and 191E of the ACL]
1.46 Allowing the regulations to exempt certain gift cards or those
supplied in certain circumstances from all or some of the requirements
will provide the Government with the necessary flexibility to make timely
changes to support industry to adopt innovative marketing techniques to
encourage demand and manage stock levels. It will also allow the law to
adapt to changes in technology. [Schedule 1, items 6 and 7, sections 99G and
191E of the ACL]
1.47 Allowing the regulations to exempt persons from all or some of
the requirements will provide a flexible approach to ensure the regime
only imposes obligations on the appropriate persons. For example, it may
be appropriate to exempt gift cards supplied by charities. [Schedule 1, items 6
and 7, sections 99G and 191E of the ACL]
11
Treasury Laws Amendment (Gift Cards) Bill 2018
1.48 The regulations would be subject to disallowance and therefore
any exemptions provided for in the regulations will be subject to
appropriate parliamentary scrutiny.
Offences
1.49 If a gift card is supplied and the expiry date of the gift card is
less than three years, a person commits a strict liability offence. The
maximum penalty is $30,000 for a body corporate and $6,000 for persons
other than a body corporate. [Schedule 1, item 7, section 191A of the ACL]
1.50 If a gift card is supplied and the required disclosure about the
expiry of the gift card does not appear prominently on the gift card itself,
a person commits a strict liability offence. The maximum penalty is
$30,000 for a body corporate and $6,000 for persons other than a body
corporate. [Schedule 1, item 7, section 191B of the ACL]
1.51 If a gift card is supplied and the terms and conditions of the gift
card allow for a post-supply fee to be charged, a person commits a strict
liability offence. The maximum penalty is $30,000 for a body corporate
and $6,000 for persons other than a body corporate. [Schedule 1, item 7,
section 191C of the ACL]
1.52 If a person charges a post-supply fee, a person commits a strict
liability offence. The maximum penalty is $30,000 for a body corporate
and $6,000 for persons other than a body corporate. [Schedule 1, item 7,
section 191D of the ACL]
1.53 The penalty provisions contained in the Bill are consistent with
existing penalties in the ACL for similar offences. Strict liability offences
are appropriate in this circumstance, as it is necessary to strongly deter
misconduct that can have serious detriment for consumers. Strict liability
offences also reduce non-compliance, which bolsters the integrity of the
regulatory regime enforced by the ACCC. Strict liability is particularly
beneficial to regulators as they need to deal with offences expeditiously to
maintain public confidence in the regulatory regime.
1.54 The strict liability offences in the Bill meet all the conditions
listed in the Attorney-General's Department's A Guide to Framing
Commonwealth Offences, Infringement Notices and Enforcement Powers,
September 2011 edition. For example, the fines for the offences do not
exceed 60 penalty units for persons other than a body corporate or 300
penalty units for a body corporate. The application of strict liability, as
opposed to absolute liability, preserves the defence of honest and
reasonable mistake of fact to be proved by the accused on the balance of
probabilities. This defence maintains adequate checks and balances for
persons who may be accused of such offences.
1.55 The civil penalty provisions contained in the Bill should not be
considered 'criminal' for the purposes of human rights law. While a
criminal penalty is deterrent or punitive, these provisions are regulatory
12
National gift card reforms
and disciplinary. Further, the provisions do not apply to the general
public, but to a sector or class of people who should reasonably be aware
of their obligations under the CCA (e.g. companies and small business
owners). Imposing the civil penalties will enable an effective disciplinary
response to non-compliance. Finally, the civil penalties are for small
amounts, with no sanction of imprisonment for non-payment of the
penalty.
Enforcement and remedies
1.56 The gift cards provisions will be inserted into Chapters 3 and 4
of the ACL. The ACCC will therefore have access to the range of
remedies in Chapter 5 of the ACL to address any misconduct. For
example, the ACCC may commence legal proceedings to seek a court to
issue an injunction order to stop a person from supplying non-compliant
gift cards for a specified time period. The ACCC can also seek a court to
make an adverse publicity order, requiring a person to disclose certain
information specified by the order and for the person to disclose this
information to the public.
Infringement notices
1.57 In addition, the ACCC will be given the power to issue an
infringement notice if it has reason to believe a person has provided a gift
card:
• without a minimum three year expiry period;
• that does not prominently set out the required expiry
disclosure; or
• with prohibited terms and conditions.
The ACCC may also issue an infringement notice if it has reason to
believe a person has charged a post-supply fee. [Schedule 1, item 2, after
paragraph 134A(2)(e) of the CCA]
1.58 The infringement notice penalty for these provisions for a body
corporate is 55 penalty units (currently $11,500) and the penalty for
persons other than a body corporate is 11 penalty units (currently $2,420).
[Schedule 1, item 3, section 134C (after table item 6) of the CCA]
Application provision
1.59 The Bill commences the day after Royal Assent and applies to
gift cards supplied on or after 1 November 2019. [Clause 2 and Schedule 1,
item 10, section 302 of the ACL]
1.60 This provides industry with sufficient time to adjust if necessary
while also introducing important protections for consumers in time for the
2019 Christmas period.
13
Chapter 2
Regulation impact statement
Executive Summary
Introduction
2.1 In Australia 34 million gift cards are estimated to be sold each
year with an estimated value of $2.5 billion. Gift cards are sold across the
economy by national retailers and small businesses. One of the commonly
used terms and conditions of gift cards are expiry dates. Of the gift cards
sold by these businesses a certain percentage are not redeemed before they
expire.
2.2 Many consumers experience the disappointment of an expired
gift card, the most recent estimated losses from gift card expiry are
considered to be in the order of $70 million annually.2 When a gift card
expires before it can be used a consumer experiences the personal
detriment from the loss of value on a gift card. Many recipients of gift
cards are not aware of the expiry dates for gift cards they are given. In
these circumstances those consumers expect their gift cards to last for a
reasonable time.
2.3 There is currently no uniform national regulation for the
minimum length of time a gift card should last. In late 2017, New South
Wales (NSW) introduced laws requiring a minimum three year expiry
period for gift cards sold in that state. South Australia is also in the
process of enacting its own requirements.3
2.4 This Decision Regulation Impact Statement (RIS) examines
options to reform gift card expiry dates to achieve a uniform national
approach for all types of gift cards (regardless of their delivery
mechanism). There are three options to reduce consumer detriment and
improve outcomes for consumers in relation to gift card expiry dates:
• Option 1 - the status quo
• Option 2 - prohibition on gift card expiry dates
• Option 3 - three year minimum expiry dates
2
Finder, Media Release: Aussies wasting $70 million per year on unredeemed gift cards, 2017,
https://www.finder.com.au/press-release-aussies-wasting-70-million-per-year-on-
unredeemed-gift-cards
3
The Fair Trading (Gift Cards) Amendment Bill 2018 was introduced into the South Australian
Parliament in May 2018 and is similar to the NSW legislation.
15
Treasury Laws Amendment (Gift Cards) Bill 2018
2.5 Introducing a minimum three year expiry period (Option 3) is
the preferred policy option as it has the highest net benefit of the options
identified in this Regulation Impact Statement. Such an approach would
address the information asymmetry that may be faced by a gift card
recipient who is unaware of its expiry date-- addressing the key consumer
harm caused by expired gift cards.
2.6 Businesses and industry advocates expressed strong concerns
with Option 2, noting that it was inconsistent with existing standards used
in card and point of sale technology; provided for the accumulation of
large liabilities; and imposed associated record keeping/legacy system
management difficulties. Option 1 is not preferred given overwhelming
feedback that a nationally consistent approach to gift card expiry dates is
required. With regulation in place in one state, and being progressed in
one other, the status quo does not provide a nationally consistent
approach.
The Problem
Summary
2.7 Consumers can experience disappointment and a financial loss
when a gift card expires. Nationally, there are no uniform requirements
for minimum expiry dates on gift cards.
2.8 Expiry dates are used on gift cards by companies to limit the
ongoing liabilities from gift cards into the future. An expiry date is one of
the commonly used terms and conditions that limit the use of a gift card
compared to a cash equivalent.
2.9 The length of an expiry date on a gift card may vary
considerably depending on the preferences of the trader issuing the gift
card. Some gift cards can expire in three months and others last several
years or do not expire at all. These differences in expiry dates across the
economy means that there are no reliable 'rules of thumb' for consumers
in determining how long their gift cards may be valid for, leading to
consumer complacency, confusion and ultimately, disappointment and
financial loss when gift cards expire.
2.10 Purchasers of gift cards should gain a clear understanding from
the retailer of the gift card what the expiry date will be at the time of
purchase, as the length of the expiry period is at the preference of the
trader. In 2012, the Commonwealth Consumer Affairs Advisory Council
(CCAAC) found that relying on the purchaser of a gift card to adequately
disclose the terms and conditions (including expiry dates) to the final
recipient is unlikely to result in adequate disclosure. This means that the
end consumer if often unaware of the expiry date of their gift card.
16
Regulation impact statement
2.11 Where the purchaser of a gift card does not adequately inform
the recipient of the gift card about its expiry date, the recipient would
expect the gift card to operate for a reasonable period of time.
2.12 Despite gift cards being commonly understood to have expiry
dates, the wide range of expiry periods can create confusion around how
long a gift card could, at a minimum, be expected to last. Where a
business only provides a short expiry period some consumers experience
dissatisfaction and detriment from the loss of value on the gift card, if it
expires before they would have reasonably expected it to. Nationally there
may be, on average, around $70 million lost through gift cards expiring
before they can be used.
The Australian Gift Card Market
What is a Gift Card?
2.13 A gift card is a card or voucher that can be exchanged for goods
and services. Gift cards can be redeemable at a single business (e.g. an
independent beauty salon) or at multiple stores/locations (e.g. a retail
chain or a shopping centre). They can be for a fixed price or a particular
good or service. They are typically purchased to be given as a gift but may
also be retained by the purchaser for their own use.
2.14 Over the last year, two state jurisdictions have developed their
own gift card definitions. The NSW Fair Trading Act 1987 currently
defines a gift card as 'a card or voucher (in hard copy or electronic form)
that is redeemable for goods or services in New South Wales'. A similar
definition has been included in the South Australian Fair Trading (Gift
Cards) Amendment Bill 2018, which defines a gift card as 'a card or
voucher (however described and whether in physical or electronic form)
that is redeemable for goods or services in South Australia'.
2.15 During consultation, various stakeholders supported a gift card
definition similar to that used in NSW or noted that they had already made
adjustments to bring themselves into compliance. Stakeholder feedback
did not propose that the different types of gift cards included under the
arrangements be regulated differently. Consumer groups also supported a
gift card definition similar to NSW. A nationally consistent approach to
Commonwealth and state/territory legislation is therefore favoured.
Overview of the Australian Gift Card Market
2.16 A gift card is typically a card or voucher that is redeemable for
goods or services. There are a range of different types of gift cards and
gift card delivery mechanisms. Gift cards can be provided in physical or
electronic formats; they can be a simple piece of paper or hard plastic
17
Treasury Laws Amendment (Gift Cards) Bill 2018
card, or they can be as sophisticated as a mechanism built into a smart
phone or a debit/credit card that uses the existing payments system
network.
2.17 Most gift cards operate by providing a facility where 'store
credit' of a particular value is purchased by one consumer to be given to
another for use at a specific store or a range of stores. Some gift cards,
rather than providing a fixed value, are designed to be redeemed for the
provision of a specific service (such as a beauty treatment). Regardless of
the type of card, delivery mechanism, or type of business, where the gift
card expiry date has not been communicated sufficiently to the end
consumer, there is the potential for consumer detriment.
Types of Gift Cards
2.18 There are generally two main forms of gift cards - closed loop
gift cards and open loop gift cards.
Closed Loop Gift Cards
2.19 Closed loop gift cards, also known as 'single store gift cards' are
accepted or honoured at a single retailer or group of affiliated merchants
(such as a chain of book stores or clothing retailers) as payment for goods
or services. They are typically provided either as a fixed dollar amount
card or a card for a particular service. Closed loop gift cards do not
typically attract administration fees.
2.20 Closed loop gift cards are the most common type of gift card in
the market.4 The most up to date data following consultation remains the
Australia Retailers Association's (ARA) 2016 estimate of 32 million
closed loop gift cards being issued in Australia.5
Open Loop Gift Cards
2.21 Open loop gift cards, also known as 'multi store gift cards'
typically rely on the payment system (e.g. use Visa, Eftpos or MasterCard
systems) and can be used at a wide variety of retailers that accept or
honour cards displaying that network.
2.22 Multiple use store cards provide consumers with more variety in
their purchasing decisions and allow them access to a wide range of
stores. In 2016, the ARA estimated that 2 million open loop gift cards
4
Commonwealth Consumer Affairs Advisory Council, Gift Cards in the Australian Market,
2012, page 25.
5
Australia Retailers Association, Submission to the Senate Standing Committee on Economics
inquiry into the Causes and consequences of the collapse of listed retailers in Australia
(ARA Senate Submission, 2016), 2016, page 5.
18
Regulation impact statement
were issued in Australia, which remains the most up to date estimate
following consultation.6
2.23 More recently, digital providers have developed online
platforms for consumers to purchase digital gift cards. These online
platform gift cards include facilities such as iTunes or Google Play gift
cards. These cards allow the final recipient of the gift card to load value
into their account for that service. That value is then stored by the online
platform for use by the gift card recipient.
Temporary Marketing Promotion Gift Cards
2.24 Some companies offer gift cards for promotional purposes.
These can be closed or open loop cards. Promotional cards are typically
given by the company for free (or at a significant discount) as a goodwill
gesture or to honour a commitment under a loyalty program. They may
also be offered by businesses during low demand periods to increase
short-term demand for goods and services. For example, a confidential
submission provided the example of promotional gift cards given out for
free at a shopping centre, to be spent on that day at the shopping centre.
2.25 Promotional gift cards often have an expiry period. While these
promotional cards are gift cards in a general sense, they are different from
standard closed and open loop gift cards in that they are not purchased by
one consumer to give to another. Rather, they are a gift from a company to
a recipient for other purposes. The short expiry period ensures that there is
not a significant ongoing liability from a particular promotion and may
align with the need to clear out stock.
Gift Card Purchasing
2.26 Most consumers in Australia have participated in the gift card
market, either having purchased a gift card for another person or having
received a gift card. The 2016 Australian Consumer Survey (conducted as
part of the ACL Review) identified that in the preceding two years, 69 per
cent of consumers reported purchasing a gift card.7 This is consistent with
a survey conducted by Retail Decisions Australia for the 2012 CCAAC
report that identified that 69 per cent of consumers had purchased a gift
card in the last year.8
2.27 In their submission to the 2016 Senate Inquiry to the Causes and
Consequences of the Collapse of Listed Retailers in Australia, the
Australian Retailers Association (ARA) cited research noting that
6
Ibid.
7
The Australian Treasury on behalf of Consumer Affairs Australia and New Zealand,
Australian Consumer Survey 2016, May 2016 ('Australian Consumer Survey'), page 39.
8
Commonwealth Consumer Affairs Advisory Council, Gift Cards in the Australian Market,
2012, page 27.
19
Treasury Laws Amendment (Gift Cards) Bill 2018
71 per cent of gift cards sold are bought as birthday gifts and 16 per cent
are purchased as Christmas gifts. Feedback from stakeholder consultation
confirmed that businesses typically order most of their gift cards several
months in advance of the Christmas period to ensure that they have
sufficient cards on hand to meet demand at that time.
Size of the Market
2.28 There is limited information available on the size of the
Australian gift card market. In 2016, the ARA and the Australian
Merchant Payments Forum (AMPF) estimated the size of the gift card
market in 2014 to be over $2 billion.9 The ARA is Australia's largest
industry association, representing a $310 billion retailer sector. In 2012,
ARA estimated its members represent approximately 68 per cent of the
gift cards in the Australian market.10 In 2016, CHOICE estimated that
Australians spend up to $2.5 billion gift cards on gift cards each year.11
Anecdotal evidence provided during industry consultation suggested that
the market was now above $2.5 billion, but specific data was not
available.
2.29 Similarly, there is no measure of the number of gift cards sold in
Australia. In 2016, the ARA and AMPF estimated that there were likely to
be 34 million gift cards sold each year. Of these 34 million cards,
24 million would be issued by ARA and AMPF members.12 Additionally
for cards issued by ARA and AMPF members the average spend is $56
and each card is used 1.4 times.13
2.30 In 2012, the CCAAC report was unable to identify the number
of businesses that sold gift cards in Australia. The exact number of
businesses that sell gift cards remains unclear. Feedback from business
stakeholders confirmed that gift cards are commonly used by all types of
business from small business to large corporate entities. While the
majority of gift cards are sold through ARA and AMPF members there are
a significant number of businesses outside the ARA and AMPF who sell
gift cards. CCAAC in 2012 also identified that the majority of gift cards
9
ARA, Submission to the Senate Standing Committee on Economics inquiry into the Causes
and consequences of the collapse of listed retailers in Australia (ARA Senate Submission,
2016), 2016, page 5.
10
Australian Retailers Association Submission to CCAAC Issues Paper, 2012, p. 3.
11
CHOICE, Gift Card Buying Guide: The gift card that stops giving, 2016,
https://www.choice.com.au/shopping/shopping-for-special-occasions/christmas-birthdays-
and-gifts/buying-guides/gift-cards.
12
ARA, Submission to the Senate Standing Committee on Economics inquiry into the Causes
and consequences of the collapse of listed retailers in Australia (ARA Senate Submission,
2016), 2016, page 5.
13
ARA Senate Submission, page 5.
20
Regulation impact statement
were likely to have been sold by medium and larger businesses.14 While
exact figures are unavailable, stakeholder feedback indicates that this
remains the case.
2.31 In terms of trends in the growth of gift cards, one confidential
submission commented that digital gift cards are growing at a faster rate
than physical gift cards due to the convenience to consumers and lower
distribution costs, benefiting businesses directly and potentially reducing
the need for fees for consumers. Other confidential feedback suggested
that gift card growth in the online retail sector was in the order of
14 per cent per annum.
2.32 From consultation, another potential growth area has been in
third party gift card operators that manage gift card programs for client
businesses. For example, the Anystore Gift Card Submission notes that it
provides: customised gift cards for a range of businesses, a consumer
hotline printed on the card, a website for transaction history and card
balance checks. This segment of the market has a mix of businesses
offering a range of services.
Gift Card Schemes
2.33 The gift card market has multiple participants in addition to
consumers purchasing gift cards or gift card recipients. There are a
number of participants in the gift card market:
• Gift card recipients (the end consumer) are given and spend
the value stored on the gift card. Gift card recipients
experience the detriment of an expired gift card.
• Consumers who purchase gift cards are a participant in the
market. Purchasers of gift cards are presented with terms and
conditions of a gift card when they purchase a gift card and
are responsible for providing this information to the end
consumer.
• Gift card issuers are the store selling the gift cards and are
responsible for honouring the redemption of issued gift cards.
This may be the store, shopping centre or bank.
• Gift card program operators are third parties that build and
develop the networks needed to facilitate the use of gift
cards. The two biggest gift card program operators in
Australia are Blackhawk Network and Wex Australia.
Blackhawk Network administers programs for over 100
major brands in Australia,15 while Wex Australia administers
14
CCAAC, Gift Cards in the Australian Market, 2012, page 35.
15
Blackhawk Network Website, http://www.blackhawknetwork.com
21
Treasury Laws Amendment (Gift Cards) Bill 2018
220 programs across 120 major brands in Australia and New
Zealand.16
• Consultation identified that a number of businesses facilitate
the operation of gift card schemes including: payment
clearing service providers (e.g. VISA, MasterCard and
Eftpos); authorised deposit taking institution involved in
managing companies' gift card liabilities; a limited number
of gift card manufacturers; and program operators that
manage the 'day-to-day' aspects of gift card programs on
behalf of client businesses.
• Secondary market participants are involved in the trading or
distribution of gift cards. No data was available from
consultation, so it is unclear the extent to which a secondary
market for gift cards operates in Australia, though there are
dedicated secondary markets such as CardHub.17 In the
Unites States,18 there is a strong secondary market for gift
card resale where consumers can recoup up to 90 per cent of
the original value of an unwanted gift card.19
2.34 During consultation, a range of the participants identified above
were either involved in discussions or provided submissions, however,
data on the number of gift card scheme operators in Australia and the
proportion of gift cards in Australia administered by third parties was not
available.
Consumers experience detriment when their gift card expires
before it can be used
Gift Cards Typically Expire
2.35 Expiry dates are one of the common terms and conditions that
consumers are likely to encounter on a gift card. An expiry date is a
representation that a trader will not honour the gift card unless it has been
redeemed by the recipient of the gift card before the stated date. Many
businesses will continue to honour gift cards after the expiry date to
ensure customer satisfaction and build customer loyalty ('the grace
period').
16
Wex Australian Website, http://www.wexaustralia.com
17
For example see, https://cardhub.com.au/
18
CCAAC, Gift Cards in the Australian Market, 2012, page 26.
19
Gift Granny, Most Resold Cards, 2017, https://www.giftcardgranny.com/blog/most-resold-
gift-cards-2017/
22
Regulation impact statement
Expiry's role in managing liabilities
2.36 Businesses use expiry dates on gift cards to avoid the build-up of
undeclared liabilities, as card issuers are required to record an ongoing
liability from gift cards. Maintaining this liability prevents businesses
from claiming the balance of expired gift cards. For example, the Village
Roadshow Submission noted that for open loop gift cards the cash
associated with this liability is held in escrow by an Authorised Deposit
Taking Institution (ADI) and is only remitted when the cards expire. If
expiry dates are removed, businesses may be required to maintain this
liability indefinitely in the event that the gift card would eventually be
redeemed. Further, a confidential submission noted that an ADI did not
usually pay interest to clients on these deposited funds making them
unavailable for investment for an indefinite period.
2.37 In managing their liability, businesses may be able to estimate
the portion of the liability not likely to redeemed by customers (breakage)
and write it off. However, one retailer consulted noted that if the estimate
was inaccurate, such that a higher portion of value was redeemed by
consumers, the difference may subsequently appear as a financial loss.
Expiry's role in funding schemes
2.38 A related issue raised during consultation was how expiry dates
relate to the cost of funding gift card schemes. For example, the
Australian Retailers Association submission notes that where breakage
occurs those funds are commonly used by businesses to cover
administrative costs such as accounting and administration, card issuance
and replacement, marketing, staff training and fraud management.
2.39 If a gift card issuer has their cards operated by a third party gift
card scheme they may face fees from that operator for managing an
ongoing liability.20 Breakage is one of the ways open loop scheme
operators said they funded schemes:
The cost of manufacture, encoding and processing open loop cards
also far outweighs the cost of a straight forward retail gift card.
Hence, the small element of breakage is important in helping to fund
these programs. Moreover, there is not the incremental value to the
retailer of up spend in-store upon redemption of a closed loop gift
card. Inclusion of open loop gift cards within a mandatory expiry date
scheme may price these cards out of the incentive market. (Village
Roadshow Submission)
20
Commonwealth Consumer Affairs Advisory Council, Gift Cards in the Australian Market,
2012, page 33.
23
Treasury Laws Amendment (Gift Cards) Bill 2018
2.40 While such an approach provides a niche opportunity for
businesses, a gift card is usually given with the intention that the end
recipient will use the value of the gift card. In this context, reliance on
breakage to fund schemes may not be a fair or efficient approach.
How expiry dates are a requirement of open loop schemes
2.41 Many open loop gift card schemes run through the Visa,
MasterCard and Eftpos payment clearing systems. These systems have
rules that require cards to have an expiry date, emboss it on the card and
encode it on the magnetic stripe. In this regard, a confidential submission
commented that:
... it is a technical requirement that cards using the Australian POS
[Point of Sale] network must have an expiry date, as terminals will
reject cards that have no expiry date. This expiry date is encoded onto
the magnetic stripe, which is read by the merchant's terminal. If the
expiry date has passed, the terminal will decline the transaction. It is
not possible to make "back office" changes to allow use past the
expiry date, as the date is encoded onto the physical card itself.
2.42 For some businesses this creates a maximum expiry period of
five years. Visa's Submission noted that this requirement supports card
validation and ongoing compliance with network security standards. In
addition, the technology in the card may degrade after the five year period
rendering a card unusable.
2.43 Consultation with payment system operators identified that if no
expiry was adopted they would no longer be able to offer these products
to the market. This would significantly reduce the number of cards
operating in the system.
Expiry dates and legacy systems
2.44 One confidential submission noted the potential for additional
record keeping, data management and data integrity costs if gift cards did
not expire. An example provided was a small number of old paper
vouchers with no expiry date that were being redeemed in small numbers
each year and that required manual processing. The submission noted the
potential for the form of card offerings to change over time in response to
changes in technology and consumer behaviour, which may result in
existing systems and procedures for the management of historical card
data and multiple legacy systems having to be maintained into the future.
2.45 Another confidential submission noted that it would be difficult
for gift card issuers to wind up defunct programs, as gift cards are
typically purchased anonymously (and by their nature, often gifted to a
recipient other than the purchaser), and therefore there will be no way for
the gift card issuer to contact gift card recipients and terminate the gift
card (e.g. by refunding the balance of funds on the card).
24
Regulation impact statement
Expiry dates and specific services
2.46 Many businesses use expiry periods, especially service
businesses, to ensure that they are able to supply the services described.
For service businesses a gift card often refers to a specific service and
does not state a particular value figure that the gift card is worth. Some
examples provided during consultation included: vouchers issued for
specific experience events (such as a jet boat ride), a specific live
performance event or show (e.g. a concert, musical season or festival) or a
season (a time limited theatre or festival season), and accommodation.
2.47 In relation to small businesses, advocates also noted that
vouchers with expiry dates are often used as a short term means of
managing stock levels.
2.48 Many service business costs will change over time, potentially
increasing or decreasing, and consequently the value of offering a service
would change over time.21 Without an expiry date, a business may suffer a
loss if the cost of providing the service has increased significantly since
the gift card was first issued. Consultation identified that this continues to
be a reason why service businesses offer shorter expiry periods. For
example, the Caravan Parks Association of Queensland submission
commented on costs changing over time and noted that wage costs could
easily increase 15 per cent in a 3 year period, which could effectively
swallow all profit margin.
What expiry dates businesses offer
2.49 Retail groups have previously noted that most gift cards in the
Australian marketplace have expiry dates of 12 months or longer.22 A
study by NSW Fair Trading found that no cards they sampled had expiry
dates of less than a year and that 11 per cent of cards did not have expiry
dates.23 The CCAAC report identified that several factors including size,
reliance on recent patronage, whether the issuer is a third party and market
power together influence the length of the expiry period the issuer is likely
to adopt.
2.50 Feedback received during consultation suggested that the
majority of gift cards on the market offer 12 months or longer expiry
dates, but that practices vary. For example, a survey conducted by the
Caravan Parks Association of Queensland identified that: 6 percent of
21
CCAAC, Gift Cards in the Australian Market, 2012, page 34.
22
See for example page 9 of the ARA and Australian Merchant Payments Forum submission to
Gift Cards in the Australian Market Inquiry, 2012:
https://static.treasury.gov.au/uploads/sites/1/2017/06/066AustralianRetailersAssociation.pdf.
23
New South Wales Fair Trading, Operation Fair Trading Results, 2012,
http://www.fairtrading.nsw.gov.au/pdfs/About_us/Operation_gift_card_results.pdf
25
Treasury Laws Amendment (Gift Cards) Bill 2018
members use expiry dates of less than 12 months; 65 per cent use expiry
dates of 12 months; 12 per cent use expiry dates of 3 years; and 17 per
cent do not apply an expiry date. Shorter periods were also identified
where gift cards related to specific services, such as in the live
performance industry.
2.51 Larger businesses are more likely to adopt longer expiry periods.
These businesses are better placed to manage the risks associated with
having longer expiry periods and are more susceptible to word of mouth
and repeat trade.
2.52 Consumers have expressed a preference for longer expiry dates
and competition between businesses is likely to result in longer expiry
periods. Anecdotal feedback obtained during consultation suggested that
following the NSW changes, national businesses have tended to move to a
three year minimum expiry period or longer. The below table summarises
analysis undertaken by Treasury to identify a sample of expiry periods
from national businesses.
26
Regulation impact statement
Box 1: National BUSINESSES gift card expiry periods
National businesses have typically adopted expiry periods based
on what they have determined to be appropriate for their particular
circumstances. A range of businesses with a national presence
have already, following the NSW law, begun to move to periods
of three years or more.
Gift card schemes that have adopted or are adopting three year
expiry periods:
• David Jones gift cards.
• Myer gift cards sold from 31 March 2018.
• Westfield gift cards sold from 31 March 2018.
• Google Play cards.
• Coles gift cards sold from 31 March 2018 have four
year expiry dates.
• Rebel Sport gift cards.
• Priceline gift cards sold from 26 March 2018.
• Qantas gift cards sold from 31 March 2018.
• Virgin Australia gift cards sold from 31 March 2018.
• OPSM gift cards.
• Dymocks gift cards sold from 31 March 2018.
• Harvey Norman gift cards.
Gift card schemes with no expiry dates:
• iTunes vouchers.
• JB Hi-Fi gift cards.
• Woolworths gift cards sold from 31 March 2018.
• Bunnings gift cards.
• The Good Guys gift cards.
• Lowes gift cards sold from 31 March 2018.
Gift card schemes with shorter expiry dates:
• A range of theme and entertainment parks have a 12
month expiry period.
27
Treasury Laws Amendment (Gift Cards) Bill 2018
Consumer Detriment
2.53 In 2012, CCAAC was able to identify that there were instances
of consumer detriment from the application of expiry dates. CCAAC
however, came to the conclusion that there was not any overwhelming
evidence of systematic consumer detriment with respect to the application
of expiry dates. In making this finding, CCAAC noted that there was
merit in continuing to monitor if new evidence emerged.
2.54 The detriment encountered by consumers comes from an expired
gift card. A 2017 Finder survey of 2,005 people estimated that 2.6 million
Australians lost money from a gift card expiring in the previous two years,
with an average loss of $54.24
2.55 Many consumers also experience disappointment and
embarrassment when they seek to redeem a gift card in a store that has
expired. When a gift card expires the value stored on that card transfers
from the holder of the gift card to the issuer of that card.
2.56 CCAAC noted that there were issues with the disclosure of
terms and conditions associated with gift cards. Gift cards are an unusual
product in that the purchaser of the product is not usually the same as the
final recipient of the gift card. Typically where there are terms and
conditions these can be explained at the point of sale. The CCAAC report
noted that it was unrealistic to assume that the transfer of this information
(from the purchaser to the recipient) would always occur.25
2.57 Where terms and conditions are not disclosed or passed on to
final recipients, they have an information asymmetry. Consultation
feedback suggested that there are typically good disclosure practices on
gift cards that reduce the information asymmetry related to the provision
of information to consumers, but not consistently applied. This is
supported by a NSW Fair Trading study, which found that 26 per cent of
gift cards did not have the expiry date on the card (or the combination of
the issue date and expiry date period).26
2.58 These differences in expiry dates across the economy means that
there are no reliable 'rules of thumb' for consumers in determining how
long their gift cards may be valid for, leading to consumer complacency,
confusion and ultimately, disappointment and financial loss when gift
cards expire.
24
Finder, Media Release: Aussies wasting $70 million per year on unredeemed gift cards, 2017,
https://www.finder.com.au/press-release-aussies-wasting-70-million-per-year-on-
unredeemed-gift-cards
25
CCAAC, Gift Cards in the Australian Market, 2012, page 30.
26
http://www.fairtrading.nsw.gov.au/pdfs/About_us/Operation_gift_card_results.pdf.
28
Regulation impact statement
2.59 While there is evidence to suggest that the revenue received by
businesses from expired gift cards partly funds the costs of operating gift
card schemes, it is not necessarily fair that consumers who are unable to
use their cards prior to expiry cover the costs associated with running gift
card schemes. In effect those who do not benefit from the use of a gift
card cover the costs of those that do benefit.
Possible Scale of Detriment
2.60 The term 'breakage' is often used to refer to gift card balances
that go unredeemed. Breakage represents the transfer of welfare from the
consumer to the gift card issuer. Estimates of breakage rates in the
Australian gift card market differ considerably between consumer and
industry groups and it is unclear which estimate is more reliable.
• In 2016, the ARA and AMPF estimated that breakage in
Australia is 3 per cent (on historical figures from 2014).
Three per cent of the total gift card market, if valued at $2
billion, equates to $60 million. The breakage rate from the
ARA and the AMPF does not however indicate the
percentage of consumers who experience problems with gift
card redemption.
• CHOICE's 2016 research found that 35 per cent of CHOICE
members reported having a gift card expire. CHOICE's
sample for this study however may not be representative of
Australia as a whole.
• The 2017 Finder market research survey estimated that of
their sample 14 per cent of respondents had let funds expire
in the last two years. The Finder study also found that
consumer losses from expired gift cards were valued at $142
million in the last two years (or $70 million per annum).
2.61 The total quantum of losses from expired gift cards described
above remains the most up to date data following consultation. Similar to
previous inquiries, industry groups have stated that there are low levels of
losses across the economy. Meetings with individual industry stakeholders
identified that breakage is very low for some schemes (around three per
cent on average), but that there can be a large range. At the higher end of
the range, one stakeholder cited a figure of between 15 and 20 per cent.
The 3 per cent figure that was estimated in the Consultation RIS may have
been conservative and linkages to the existing expiry term may be
important.
29
Treasury Laws Amendment (Gift Cards) Bill 2018
2.62 In 2012, the CCAAC report noted information from retailers that
the majority of gift cards are used within three months of purchase.27 In
2016, the ARA noted that longer expiry periods may, in turn, result in
lower redemption rates for gift cards that could be counter-productive for
consumer welfare. In submissions to the 2012 CCAAC report, retailers
who offered an expiry period of 24 months or longer noted that it was rare
for a gift card to be redeemed sometime between 12 and 24 months after
being issued.28 Submissions received from two individual businesses
during the consultation process for this review suggest that redemption
does occur between 12 and 24 months, but at a slower rate than the first
12 months.
Policy Objective
2.63 The objective of this reform is to:
• ensure that consumers that purchase and receive gift cards
have a reasonable period of time to use the gift card before it
expires, leading to a reduction in breakage;
• provide businesses with certainty through a nationally
consistent approach to gift card expiry regulation; and
• continue to ensure that there is a viable gift card market that
meets the needs of consumers.
2.64 The options seek to address the problem of consumer detriment
caused by expired gift cards while balancing the impact of any reform on
businesses issuing gift cards.
Policy Options and Impact Analysis
SUMMARY
2.65 There are three options to reduce consumer detriment and
improve outcomes for consumers in relation to gift card expiry dates.
2.66 To address the problem defined, this RIS explores three options:
• Option 1 - the status quo
• Option 2 - prohibition on gift card expiry dates
• Option 3 - three year minimum expiry dates
27
CCAAC, Gift Cards in the Australian Market, 2012, page 32.
28
CCAAC, Gift Cards in the Australian Market, 2012, page 77.
30
Regulation impact statement
Option 1: Status Quo
2.67 Under this option the status quo is maintained for the regulation
of gift card expiry dates. Businesses would continue to determine the
periods that they consider to be appropriate for gift card expiry.
2.68 Consumer advocates such as CHOICE submitted that the current
system outside of NSW is leading to consumer detriment, citing its 2014
research that one in three gift cards expire before being fully used. Given
consumers have expressed a preference for longer expiry periods,
businesses may choose to compete for consumer spending by providing
longer expiry periods or removing expiry periods from their gift cards.
Businesses may also continue to allow 'grace periods' for consumers who
have gift cards that have expired. The existing law does not, however,
nationally regulate minimum expiry periods for gift cards and any
conflicts between current and future laws in individual states and
territories may result in an additional regulatory burden.
2.69 This option is supported by industry advocates such as ARA and
the Restaurant and Catering Industry Association, who favour an industry-
led voluntary code of conduct. However, the ARA's submission also
highlights the need for consistency across Australia, with a view to
reducing conflicting compliance regimes between jurisdictions and
providing certainty to both retailers and consumers.
2.70 The need for national consistency was also raised in the Law
Council of Australia Submission, which noted:
Option 1 - The preservation of the status quo does not appear to be the
most desirable option, as the NSW Government's recent legislative
enactment of minimum gift card expiry dates has created
inconsistencies between various States and Territories of Australia, an
outcome which poses challenges to national businesses and which
undermines the national consumer protection framework enshrined in
the Australian Consumer Law (ACL).
Current and Existing Law
2.71 There is no a single national regulatory framework governing
gift card expiry dates. Rather, gift cards are regulated by a range of
different pieces of legislation.
Commonwealth Legislation
Australian Consumer Law and Australian Securities and Investments
Commission Act 2001
2.72 Like all goods and services in the economy, gift cards are
regulated by the Australian Consumer Law (ACL) contained within the
Competition and Consumer Act 2010 and the mirror consumer protection
31
Treasury Laws Amendment (Gift Cards) Bill 2018
provisions of the Australian Securities and Investments Commission Act
2001 (ASIC Act).
2.73 These Acts provide generic consumer protections including the
prohibitions against:
• misleading or deceptive conduct;
• unconscionable conduct; and
• unfair contract terms.
2.74 These pieces of legislation do not include standards for product
design and do not provide specific regulations in relation to expiry dates.
However, these laws ensure that businesses are not misleading consumers
in their terms and conditions.
Corporations Act 2001
2.75 The Corporations Act 2001 (Corporations Act) provides some
regulatory coverage to certain types of gift cards.
2.76 Part 7.1, Division 3 of the Corporations Act outlines the
meaning of 'financial product'. Subdivision B, sets out a general
definition that refers to facilities that have a specified 'financial product
purpose', which includes 'making non-cash payments'. Section 763D
describes what does, and does not, involve 'making non-cash payments'.
Section 763D(2)(a)(i) excludes payments made through a facility where
there is only one person to whom payments can be made. This means that
gift cards that can be used only in a single store are not classed as
financial products for the purposes of the Act. Multi-store gift cards, such
as 'Westfield' gift cards, are considered to be financial products for the
purposes of the Act.
2.77 ASIC has given relief from the licencing and disclosure
requirements of the Corporations Act for various kinds of non-cash
payment facilities, including open loop multi-store gift cards. This relief is
contained in ASIC Corporations (Non-Cash Payment Facilities)
Instrument 2016/211. For gift cards, one of the requirements for relief is
that, where the card is subject to an expiry date, appropriate arrangements
are in place to prominently disclose the expiry date. That is, there are no
restrictions on expiry dates, but they must be disclosed.
ePayments Code
2.78 The ePayments Code is a voluntary code that applies to
consumer electronic payment transactions, including ATM, EFTPOS and
credit card transactions, online payments, internet and mobile banking and
BPAY.
2.79 The Code was formerly known as the Electronic Funds Transfer
Code of Conduct (EFT Code) which has existed since 1986. While the
32
Regulation impact statement
Code is a voluntary code of practice, most banks, credit unions and
building societies currently subscribe to the ePayments Code along with a
number of non-banking subscribers.
2.80 The Code is relevant to transactions made using gift cards issued
by subscribers (as well as to payment transactions made through other
facilities, such as debit and credit facilities, online and telephone payment
facilities, and reloadable prepaid cards).
2.81 For facilities that are not reloadable (which includes gift cards),
the Code contains rules specifying a minimum expiry period of 12 months
from the date it is activated (unless the holder is entitled to a refund of the
unused value on expiry).
2.82 ASIC is responsible for the administration of the ePayments
Code, including compliance monitoring and reviewing it regularly. As a
voluntary code of conduct, any changes to the Code would also be subject
to industry consensus.
State Legislation
New South Wales
2.83 The Fair Trading Amendment (Ticket Scalping and Gift Cards)
Act 2017 was passed by the NSW Parliament on 18 October 2017, with
the new law commencing on 31 March 2018. The new law introduced a
mandatory three year minimum expiry date for gift cards and gift card
vouchers sold to a consumer in NSW, as well as a ban on post-purchase
fees. In NSW, upfront fees are permitted but post-purchase fees are not.
2.84 Under the law, the three year expiry period begins from the date
a gift card is sold to a consumer. Businesses can choose to apply an expiry
period longer than the three years or no maximum expiry period. All gift
cards sold in store or online are subject to the new law. However, there are
some exclusions to the law, such as:
• some open loop systems (reloadable prepaid gift cards that
can be spent at any store, examples of this include VISA
prepaid credit cards);29
• online gift cards (to the extent that they are not sold to a
NSW consumer); and
• some gift cards sold for particular goods and services.30
29
Non-reloadable prepaid gift cards are to be included in the NSW scheme form 1 October
2018.
30
The full list of NSW exceptions are set out in Regulation 23A of the Fair Trading Regulation
2012.
33
Treasury Laws Amendment (Gift Cards) Bill 2018
2.85 In response to the law many national retailers have implemented
consistent national minimum expiry dates.
All Other States and Territories
2.86 All other state and territory jurisdictions in Australia do not
currently have specific gift card laws. South Australia, however, is in the
process of enacting its own legislation through the Fair Trading (Gift
Cards) Amendment Bill 2018. The Bill takes a similar approach to the
NSW legislation, in seeking to legislate three year minimum expiry
periods and a ban on post purchase fees. Regulations exempting certain
types of cards will also form part of the arrangements if the Bill is passed
into law.
Voluntary 'grace periods'
2.87 Expiry dates on gift cards indicate that a business is only
guaranteeing that they will honour the commitment on a gift card for a
specific period of time. However, many businesses offer 'grace periods'
that allow a business to still honour the gift card after it expires. 'Grace
periods' can provide flexibility for businesses in accordance with their
customer service policies. These policies can reduce the risk of customer
dissatisfaction and can be used to reduce the risk of losing repeat
customers or receiving negative customer feedback in relation to a
business's gift card policy. Any grace period is at the discretion of the
business issuing the card, with some businesses consulted advising that
they offer grace periods as short as one month.
Impact analysis for Option 1
Impact on Businesses
2.88 If the status quo is maintained, the current laws would continue
to operate. This approach is not, however, cost-free. With State
governments already taking action on gift cards, maintaining the status
quo would involve costs of multiple overlapping regulatory frameworks at
a state and territory level. Businesses that operate in multiple jurisdictions
would also have costs associated with maintaining multiple systems for
managing gift cards with different expiry dates to comply with the
different regulatory frameworks. Many national businesses are already
incurring the costs of transitioning to longer expiry terms to avoid this
issue.
2.89 Since the introduction of the NSW reforms, South Australia has
introduced legislation in similar terms. Stakeholders noted the similarity
between these regimes, but were concerned that other states and territories
may move to introduce conflicting regulation. For example, the Law
Society of Australia submitted that:
34
Regulation impact statement
The NSW Act has extraterritorial application such that all businesses
suppling to consumers in New South Wales, irrespective of their
location, are bound by the NSW Gift Card Laws. ... If other States or
Territories were to introduce similar laws without guidance at a
federal level, even a minor difference to the NSW Gift Card Laws
might cause compliance difficulties for businesses operating in
different jurisdictions or online.
Impact on Consumers
2.90 Under this option a small percentage of consumers will continue
to experience losses from gift cards expiring. While businesses may offer
grace periods, there will not be a minimum period that a consumer would
reasonably expect a gift card to last. Consumers advocates indicated that
under the status quo, confusion would grow with the introduction of state
based regimes for regulation of gift card expiry dates.
Net impact
2.91 Maintaining the status quo will result in different States and
Territories having different minimum expiry dates for gift cards. This will
create confusion for businesses that operate in more than one State or
Territory and also for consumers, who may be unaware that the gift cards
have different minimum expiry dates across Australia. Given that Option
1 does not address the consumer harm associated with gift card expiry and
creates confusion for business as a result of a lack of national consistency,
it is not the preferred option.
BENEFITS COSTS
• Businesses will be able to continue to • Some consumers will continue to
set expiry periods that align with their experience losses from expired
business needs. gift cards.
• Businesses continue to compete • Consumers may continue to be
through offering longer expiry periods unaware of 'grace periods'
in line with consumer preference. offered by businesses.
•
• There is no nationally consistent
approach to gift card expiry, with
businesses having to comply with
different regulatory frameworks
depending on the state or territory
in which the gift card is issued or
(for online transactions) where
the purchaser resides.
Compliance Costs
2.92 Maintaining the status quo would represent no change to the
current regulatory environment. However, many national businesses are
35
Treasury Laws Amendment (Gift Cards) Bill 2018
choosing to adopt longer expiry periods for their gift cards in response to
the NSW gift card law. Any differing requirements that develop at the
state and territory level (such as between existing NSW law and
forthcoming South Australian regulation) may have a cost to businesses
operating across those borders (to understand the laws applicable to
individual transactions and to ensure that those transactions comply with
laws in relevant jurisdictions).
2.93 Therefore, at present there are no additional compliance costs
associated with maintaining the status quo, but there may be in the near
future. The increase in consumer confusion and business uncertainty will
have an unquantifiable negative impact for consumers and businesses.
Option 2: Prohibition on Expiry periods
2.94 Under this option, the use of expiry dates would be prohibited,
giving consumers the ability to use their gift cards well into the future.
2.95 A prohibition on the use of minimum expiry periods would
overcome the problem of consumers encountering the detriment from an
expired gift card because the gift card would always be valid. By
removing expiry dates, consumers would no longer lose the value stored
on a gift card from that card expiring. If implemented, this option would
create an inconsistency between Commonwealth legislation and existing
NSW legislation. However, if agreed to by Consumer Affair Ministers,
Option 2 could be adopted nationally.
Practical difficulties
2.96 Submissions received through the consultation process have
highlighted some practical difficulties with prohibiting the use of gift card
expiry dates. For example, the Law Council of Australia noted the
potential for difficulties in processing very old and damaged gift cards.
Other submissions noted the limited life span of plastic cards, such as
magnetic stripes that last three to four years. In this regard, one
confidential submission noted:
The removal of expiry periods will pose a number of operational
challenges for businesses in the event consumers seek to redeem these
cards after this time period as cards may no longer function as
intended. This will require businesses to replace the Gift Card at the
businesses expense. There is also a possibility this cost may be passed
on to consumers.
2.97 Similarly, many open loop gift card schemes run through the
Visa, MasterCard and Eftpos payment clearing systems and these systems
have rules that require cards to have an expiry date. Further, Australian
Point of Sale terminals are designed to reject cards that have no expiry
36
Regulation impact statement
date. Visa's Submission noted that this requirement supports card
validation and ongoing compliance with network security standards.
2.98 Some advocates suggest that the costs for small businesses of
complying with multiple overlapping regulatory frameworks that evolve
over time may act as a deterrent to issuing gift cards. For example, the
submission from the Australian Small Business and Family Enterprise
Ombudsman noted that:
Small businesses will not be able to compete with large national
businesses who have the depth of resources to issue gift cards with no
expiry therefore circumventing the need to monitor legislative
requirements across jurisdictions.
2.99 One confidential submission noted the potential for the form of
card offerings to change over time in response to changes in technology
and consumer behaviour, which may result in existing systems and
procedures for the management of historical card data and multiple legacy
systems having to be maintained into the future.
2.100 Another confidential submission noted that it would be difficult
for gift card issuers to wind up defunct programs, as gift cards are
typically purchased anonymously (and by their nature, often gifted to a
recipient other than the purchaser), and therefore there will be no way in
which the gift card issuer could contact gift card recipients and terminate
the gift card (e.g. by refunding the balance of funds on the card).
2.101 A further confidential submission suggested that a prohibition
on expiry dates would require businesses to effectively contract with
cardholders for an indefinite period. The submission also noted that third
party gift card scheme operators may impose fees and other contractual
obligations on gift card issuers for maintaining an ongoing program and
that maintaining indefinite contracts between those parties (scheme
operators and card issuers) was not commercially feasible.
2.102 Feedback during consultation also reflected that costs had
already been incurred by businesses in adopting three year minimum
expiry periods to comply with the regulatory arrangements in NSW. For
example, the Shopping Centre Council of Australia's submission cited
staffing costs (such as costs associated with staff ensuring compliance,
changes to online material, liaison with participating retailers, external
legal advice costs, and destruction and reprinting of cards).
Accounting for Liability
2.103 In the 2012 CCAAC report, the issue of managing liability was
one of the major factors highlighted as to why businesses use expiry dates.
Blackhawk (a major gift card scheme operator) noted "a contingent
liability needs to be maintained for gift cards indefinitely as the gift card
could be redeemed at any point in the future. This ties up significant
37
Treasury Laws Amendment (Gift Cards) Bill 2018
funds, audit and compliance costs as well as making these funds
unavailable to the economy as a whole as the card issuer cannot reuse the
funds on expired cards".31 Changes to Australian Accounting Standard
Board standards may mean that entities are no longer required to maintain
contingent liabilities if the possibility of gift card redemption becomes
remote.32
2.104 In consultation businesses of all sizes noted that managing
liability is a significant issue. This may have the most significant impact
on smaller gift card scheme operators. For example, the Anystore Gift
Cards submission notes that no transitional period would be appropriate if
expiry dates were prohibited as it could not continue the business under
this model. Similarly, Live Performance Australia's submission notes that
many of its constituents are dependent on recurrent and project funding
from governments, sponsorships and philanthropic donors who scrutinise
financial results before making funding decisions.
2.105 In addition, carrying liabilities for longer means that there could
potentially be a greater pool of liabilities owed by a company in the event
of insolvency or bankruptcy. External administrators who deal with
insolvent companies treat gift card holders as unsecured creditors. The
Corporations Act 2001 determines the order in which the external
administrator has to repay money owed by a company to certain creditors.
International Approaches
2.106 Internationally some jurisdictions have moved to introduce
regulation of gift card expiry dates. Canada and the United States are two
prominent examples of jurisdictions that have moved to regulate expiry
dates.
Canada - Ontario
2.107 On 1 October 2007, Ontario introduced laws to ban the use of
expiry dates and most fees on gift cards bought after that date, to make
sure that consumers receive their full value regardless of when they use
them. Laws were also introduced to require all terms and conditions to be
stated in clear and visible writing for consumers. There are some
exceptions to the law, including gift cards for one specific service (for
31
Blackhawk, Submission to Gift Cards in the Australian Market Inquiry,
https://static.treasury.gov.au/uploads/sites/1/2017/06/074BlackhawkNetwork.pdf, 2012,
page 6.
32
CPA Australia, IAS 37 Provisions, Contingent Liabilities and Contingent Assets Fact Sheet,
2015, page 4
Accessible at:
https://www.cpaaustralia.com.au/~/media/corporate/allfiles/document/professional-
resources/reporting/reporting-ifrsfactsheet-provisions-contingent-liabilities-and-contingent-
assets.pdf?la=en.
38
Regulation impact statement
example, a gift certificate for a massage at a spa may come with an expiry
date and lose value if not used) and gift cards for charitable purposes are
permitted to use expiry dates.
United States
2.108 In 2010, the United States introduced new rules for gift cards
that require:
• Money on a gift card cannot expire for at least five years
from the date the card was purchased, or from the last date
any additional money was loaded onto the card. If the
expiration date listed on the card is earlier than these dates,
the money can be transferred to a replacement card at no
cost.
• Inactivity fees can be charged only after a card has not been
used for at least one year, and you can be charged only once
per month. But fees may be charged to buy the card or to
replace a lost or stolen card.
• The expiration date of a card must be clearly disclosed on the
card, and fees must be clearly disclosed on the card or its
packaging.33
2.109 Following the US reforms, the amount of money left on gift
cards decreased from US$7 per US$100 in 2008 to less than US$0.75 per
US$100 in 2015.34
Post purchase fees
2.110 In some international jurisdictions, post purchase fees on gift
cards are common business practice. These types of fees can include
activation fees, account keeping fees, balance inquiry fees and inactivity
fees. In NSW, new legislation to introduce a mandatory minimum three
year expiry date period for gift cards also included a ban on post-purchase
fees.
2.111 During consultation, gift card operators advised that they would
consider implementing post-purchase fees if expiry dates were prohibited.
Given the potential ongoing costs from managing liabilities and
supporting legacy systems (to process gift card payments), if expiry dates
were removed, post-purchase fees would serve an important role in
maintaining the ongoing viability of the gift card market. A confidential
submission, however, noted that there is a limit to the capacity of gift card
33
Federal Trade Commission, Gift Cards, 2011, https://www.consumer.ftc.gov/articles/0182-
gift-cards
34
CEB, Gift Cards State of the Union, 2015, https://www.cebglobal.com/financial-
services/tower-group/gift-cards.html.
39
Treasury Laws Amendment (Gift Cards) Bill 2018
scheme operators to recover costs from clients through fees, given that
contracts with clients would be open-ended and some clients may find gift
card schemes to no longer be economically viable.
Grandfathering Arrangements
2.112 Under this option, gift cards that are currently in circulation
(already sold) would not be covered by any new laws. Gift cards in
circulation would continue to operate according to their existing expiry
date arrangements. The gift card industry noted that for products in the
market it is not possible to alter the expiry date on a gift card after it has
been sold. This is particularly relevant in open loop schemes where the
expiry date is embossed on the card and encoded on the magnetic strip
and chip.
Impact analysis for Option 2
Impact on Businesses
2.113 Businesses will need to determine if they will be required to
change their systems to remove expiry dates from gift cards. For retailers
that rely on physical gift cards or certificates, their physical stocks of gift
cards may need to be updated to remove expiry dates, or the business may
provide an additional notification to consumers that the expiry date on
their pre-printed gift card can be ignored. In addition businesses will be
required to identify mechanisms through which they can maintain these
payment systems into the future. As such, there may be a one off cost to
businesses in replacing their stock of gift cards and designing new cards.
For retailers that rely on electronic systems to deliver their gift card
program, IT systems may need to be updated to allow for the removal of
expiry dates.
2.114 In the case of open gift card loop schemes that operate through
the Visa, Eftpos or Mastercard payment clearing systems, the rules of
those systems require the placement of expiry dates on cards.35 Gift cards
would therefore not be compliant with those rules. The system owners
would then need to consider if and how they could amend their rules
while still achieving card validation objectives and maintaining security
standards. If the rules were not amended, this would reduce businesses
ability to offer open loop gift cards and consumers choice to select an
open loop scheme.
2.115 For all businesses, staff will require training regarding gift card
expiry policies and accounting systems will also need to be investigated
35
Such cards must also prominently disclose the expiry date to obtain relief from the licencing
and disclosure requirements of the Corporations Act 2001 in accordance with the ASIC
Corporations (Non-Cash Payment Facilities) Instrument 2016/211.
40
Regulation impact statement
so that businesses can determine how they will handle gift card liability if
expiry dates are removed. In the case of businesses that operate gift card
schemes on behalf of clients, these businesses will need to review each
existing client arrangement and work with clients to make adjustments to
non-compliant schemes.
2.116 As prohibiting the use of expiry dates will have the effect of
preventing gift card breakage, retailers and gift card scheme operators
would no longer be able to take ownership of the funds available from
unredeemed gift cards. In the US, dormancy fees and card issuing fees are
common practices, card operators in Australia may seek to introduce these
fees to cover the costs of operating a gift card scheme.36 In NSW, post-
purchase fees are prohibited. Businesses will either have to absorb these
fees or pass these fees on to consumers through increased prices for goods
and services.
Impact on Consumers
2.117 Consumers will no longer need to be aware of gift card expiry
dates. Removing minimum expiry periods will ensure that consumers will
be able to use a gift card without it expiring. It is anticipated that, in line
with the experience in the US, that longer expiry periods (or for this
Option, no expiry period) will result in a fall in breakage. While some
evidence provided in response to the Consultation Regulation Impact
Statement claimed this would not be the case - the vast majority of
stakeholders consider that longer expiry periods will reduce breakage. 37
2.118 While the benefit to consumers comes at a cost to business, it
would appear reasonable for this transfer to take place as it is not fair for
businesses to receive payment for a good or service that they never
provide.
2.119 Depending on the effect on scheme profitability, gift card
scheme operators may introduce new fees that will be passed through to
consumers. Card scheme operators may seek to introduce fees into the
Australian market that consumers are currently unware of. These fees may
reduce the amount of funds available on cards to be spent by consumers
and may lead to consumer confusion with a transition from simple free
gift cards to more complex gift card schemes.
36
ARA Senate Submission, 2016, page 10.
37
For example, the ARA and AMPF noted that their data suggests that the longer the expiry
period, the lower the redemption rate becomes. A behavioural study by Suzanne Shu and
Avelet Gneezy titled Procrastination of Enjoyable Experiences in the Journal of Marketing
Research in 2010 found that subjects tend to procrastinate enjoyable experiences. However,
the study focused on much shorter time horizons (up to 2 months) in comparison to the
proposals for gift card expiry in Options 2 and 3.
41
Treasury Laws Amendment (Gift Cards) Bill 2018
2.120 To the extent that the ban on expiry dates results in consumers
holding onto gift cards for a longer period, consumers exposure to the risk
of the business that issued the gift card becoming insolvent increases. This
could reduce some of the benefits associated with the ban on expiry dates,
however, the impact is likely to be minimal.
Net impact
2.121 While this option would benefit consumers, who would no
longer have to worry about gift card expiry, it would impose significant
quantifiable and unquantifiable costs for business. It is anticipated that
Option 3 would have similar benefits to Option 2 for consumers, as
evidence from the US market suggests that the introduction of a lengthy
expiry period resulted in a significant reduction in breakage. While Option
2 could lead to a nationally consistent approach to gift card expiry
regulation, the approach would be different to the current NSW regime,
meaning businesses would have to update their systems to comply with
the new regime. Given that Option 2 imposes much higher costs on
businesses, but only marginal benefits to consumer relative to Option 3,
Option 2 is not the preferred option.
BENEFITS COSTS
• Consumers will no longer • IT systems changes to allow for
experience breakage from longer expiry periods.
failing to redeem a gift card.
• Gift card operators may introduce
fees for operating gift card schemes.
• Consumers may be dissatisfied if fees
are introduced for gift cards.
• Possible costs to accounting systems
to allow for liability from gift cards
to be carried for a longer period of
time.
• Redesign of gift cards and
replacement of gift card stock.
• Consumers may experience
confusion if gift cards come with
additional terms and conditions such
as rules around dormancy.
• Businesses will need to be made
aware of the exemptions framework
and its application to their business.
• Businesses will need to develop
modifications to existing card
technology to allow for gift cards
with no expiry dates.
42
Regulation impact statement
Compliance Costs
2.122 A prohibition on the use of gift card expiry dates is estimated to
result in a one-off compliance cost of approximately $138 million and
ongoing non-quantifiable costs. These costs are transitional costs
associated with IT system changes, accounting system changes, reprinting
and redesign costs and staff training costs. There are ongoing costs
associated with accounting and managing liabilities. There would also be
unquantifiable ongoing costs to businesses of having to maintain legacy
gift card payment schemes into the future (even when such schemes have
not been used for many years).
Option 3: Three year minimum expiry period with mandatory
information disclosure
Three Year Minimum Expiry
2.123 Under this option, businesses who offer gift cards will be
required to provide a minimum three year expiry period for gift cards.
However, it would not prevent businesses from offering a longer or no
expiry period if they choose to do so. This will mean that where a gift card
is sold a consumer will have confidence that they will be able to use that
card for a reasonable period of time.
2.124 While many consumers consider that gift cards should not
expire, expiry dates serve an important purpose for some businesses in
managing the ongoing liability from gift cards. Some stakeholders
commented that three year minimum expiry periods provide an
appropriate balance between these interests:
... we consider that requiring a redemption period of at least 3 years
for gift cards represents an appropriate level of protection for
consumers, while balancing the interests of business (given ... retailers
have the option to offer gift cards). (Queensland Law Society
submission)
2.125 A three year expiry period provides businesses the ability to
confidently write off the gift card liability at a certain period in time and
supports a nationally consistent approach:
Setting a fixed period for gift cards nationally will remove uncertainty
across borders and allow small business to manage the financial
liability within their cash flow.
... Consistency not only provides certainty for the consumer but
reduces the burden on small businesses to know of, and comply with,
variations in law across jurisdictions.
43
Treasury Laws Amendment (Gift Cards) Bill 2018
(Submission from the Australian Small Business and Family
Enterprise Ombudsman)
Mandatory Information Disclosure
2.126 While a minimum three year expiry period would give
consumers confidence that their gift cards will last for a sufficient period
of time to enable them to use them, providing consumers with information
regarding expiry remains important. Some gift cards, such as open loop
gift cards, are already subject to regulations requiring the disclosure of
their expiry date.
2.127 Under this option, businesses would also be required to provide
expiry date information when they supply gift cards. Ideally the expiry
date information should be provided with any information about how to
redeem the card, to ensure that the end user, and not just the purchaser, is
aware of the expiry date. The provision of this information would be
subject to certain requirements such as that the disclosure is made in a
way that is prominent and legible. This disclosure will reduce information
asymmetries that exist in the gift card market, where the end user of the
gift card is not provided with all the relevant information about the card.
The submission from the Law Council of Australia noted that:
This would also bring all gift cards in line with those that are
currently regulated under the Australian Securities and Investments
Commission (ASIC) Corporations (Non-Cash Payment Facilities)
Instrument 2016/211, which provides that gift cards (such as open
loop multi-store cards) must prominently disclose the expiry date and
would again ensure national consistency of gift card regulation.
2.128 This disclosure of expiry information will also allow consumers
who discover an unredeemed gift card the information they need to
identify if the card is still valid.
2.129 It is common for businesses to supply expiry date information
either on a card, or in connection with its supply. This information is
typically written onto a gift card or supplied with the packaging associated
with a gift card. For example, a NSW Fair Trading study found that, for
43 per cent of cards, comprehensive disclosures were used (showing the
card value; expiry date or combination of issue and expiry date; and terms
and conditions appeared on cards; and all applicable fees were disclosed).
Further, only 26 per cent did not have the expiry date on the card (or the
combination of the issue date and expiry date period).38
2.130 Prominently disclosing expiry information on gift cards helps to
ensure that consumers can easily determine what the expiry date is by
38
http://www.fairtrading.nsw.gov.au/pdfs/About_us/Operation_gift_card_results.pdf.
44
Regulation impact statement
looking at their card. Implementing prominent disclosure requirements
will therefore formalise existing practices for many businesses and lessen
the information asymmetry for gift card holders.
Post Purchase Fees
2.131 Similarly to Option 2, consultation addressed the possible use of
post purchase fees for gift cards if three year minimum expiry periods
were introduced. Unlike Option 2, most stakeholders did not suggest that
they were likely to require post-purchase fees to support their businesses
under this model. A three year period provides businesses with a clear
point in time that allows them to write off unredeemed gift cards,
improving their ability to manage liability.
2.132 From a consumer perspective, consultation suggested that post
purchase fees charged for managing cards (such as activation, account
keeping and inactivity fees) could be a significant and ongoing source of
consumer detriment that could affect all consumers who receive a gift
card. For example:
In our view these fees effectively undercut the benefits of extending
mandatory minimum expiry periods. (The Law Society of
NSW submission)
... if allowed, post purchase fees will be used to erode the value of gift
cards for consumers (CHOICE and Consumer Action Law Centre joint
submission)
2.133 This option proposes prohibiting most post purchase fees due to
the potential for ongoing consumer determent. This would have only
limited impacts on the ability of businesses to offer gift card schemes. In
the short term, businesses that run schemes for client businesses and who
currently rely on up-front fees and breakage to fund costs and margins
may choose to exit the market. For these (and other) businesses, it is likely
that a smaller amount of breakage would still be available, but would be
deferred to the end of the three year period (whereas they may currently
access this, for example, after one year).
2.134 Although post purchase fees would be banned, upfront fees
would continue to be allowed. While both sets of fees could be used to
fund the costs of operating a gift card scheme, post purchase fees could
also be used as a de facto expiry period (as the funds could erode unless
the card is used by a certain date).
2.135 While this option bans most post purchase fees, there are some
post purchase fees that would not be banned. Specifically, fees relating to
the purchase of goods in open loop schemes that operate through the
payment system would not be banned. For example, cards relying on the
Visa, Eftpos and MasterCard payment clearing systems may incur
currency conversion fees (such as when a gift card is used for purchases at
45
Treasury Laws Amendment (Gift Cards) Bill 2018
an overseas website) and booking fees or surcharges related to the
purchase of goods. Such fees would need to relate to the costs of the
underlying transaction, a point highlighted by the Queensland Consumers
Association submission:
Post purchase fees and charges should be prohibited, except for
surcharges imposed by retailers for use of cards issued by financial
institutions.
Any fees and charges at the time of purchase should be no greater
than the costs likely to be incurred by the issuers.
Transition
2.136 Stakeholders expressed strong views that sufficient time be
provided to minimise any impacts on businesses. While some stakeholders
sought significantly longer transition periods, 12 months was typically
identified as sufficient time for businesses to transition to the new
arrangements. Twelve months allows the majority of businesses sufficient
time to run down existing stock, redesign and reprint gift cards (in line
with what stakeholders identified as a typical print run cycle) and redesign
and test systems without significant disruption.
2.137 A 12 month period reduces the need for businesses to scrap their
existing gift card stock (particularly where expiry dates have already been
embossed and encoded on card stock), to distribute cards across networks,
train staff and inform customers of the changes.
2.138 By way of example, one significant organisation estimated a
$2 million cost to withdrawing and replacing cards if such a transitional
period was not permitted and highlighted the limited number of card
manufacturers and processors in the Australian market who would be able
to meet short term demand from across the industry. During consultation,
one major card manufacturer commented that it was working around the
clock on the roll out of new gift cards following the NSW legislation and
that they had no additional capacity at this time to facilitate a national
change over.
Impact analysis for Option 3
2.139 As previously noted, NSW recently introduced a mandatory
minimum expiry period of three years for gift cards and gift vouchers sold
to a consumer in NSW. These new requirements came into force on 31
March 2018. Consultation indicates that the transition has gone smoothly
for big businesses, but that small businesses are still coming to terms with
the new laws. Clarity in the design of the exemptions as well as a longer
transition period, than initially flagged, has assisted businesses. The major
costs identified with transition have been redesign and reprinting costs.
46
Regulation impact statement
Impact on Businesses
2.140 Most large national retailers are already offering expiry dates of
three years or more. Further, there is a trend among larger retailers to
move towards longer expiry dates. It is likely that the impacts of a
minimum three year expiry date may be felt more heavily by small
businesses, who typically use shorter expiry dates.
2.141 Option 3 would result in a nationally consistent approach to gift
card expiry regulation, as it would be consistent with the NSW and
proposed SA approaches. As such, under Option 3 businesses would not
need to maintain multiple systems to manage gift cards depending on
where the card is issued. Having a nationally consistent approach would
also assist businesses, particularly less sophisticated small businesses, by
providing a single set of standards that need to be complied with in
relation to gift card expiry. In this context, the additional costs of adopting
3 year minimum expiry periods nationally are likely to be minimised,
when compared with not adopting a national approach.
2.142 The form of technology supporting a gift card will impact on the
costs for businesses of transitioning to a 3 year minimum expiry period. In
open loop schemes, many cards have an expiry date embossed on the card
(and encoded on the magnetic stripe and chip) that cannot be altered.
These would have to be run down or replaced at additional cost. A 12
month transitional period would significantly reduce these costs.
2.143 Businesses may also have to change systems to account for
longer expiry periods. If gift cards are controlled through an electronic
system there may need to be IT changes to accommodate longer expiry
systems. Businesses accounting systems may need to be altered to ensure
that they are able to carry gift card liability for longer periods of time than
at present. Additionally there may be staff training costs if they need to be
made aware of the longer expiry periods.
2.144 Where the technology used by businesses is less sophisticated,
those businesses who currently only provide short expiry periods may
need to replace their gift card stock in order to adjust to longer mandatory
expiry periods. Similarly, some types of gift cards may have information
pre-filled, while other gift cards may simply have a blank space for an
expiry date to be filled in. Depending on how the expiry date information
is currently presented, this will affect whether or not a business needs to
redesign and replace its existing gift card stock.
2.145 While there may be costs associated with the provision of expiry
date information on gift cards, businesses typically already provide this
information, so the costs of changing disclosures are likely to be small.
While not all gift cards are currently required to provide gift card expiry
information; consultation confirmed that the majority of businesses
47
Treasury Laws Amendment (Gift Cards) Bill 2018
provide this information with gift cards. This consultation confirmed
NSW Fair Trading's prior investigation of gift cards expiry dates.39
2.146 With more awareness around gift card expiry, it is also likely
that more consumers will redeem gift cards. This would result in reduced
gift card breakage to gift card issuers and gift card scheme operators. If
this breakage can no longer be utilised by businesses when unredeemed,
gift card scheme operators may decide to apply fees for issuing gift cards,
thereby raising the cost of gift card schemes to businesses. This may also
result in a transfer of the costs for gift card schemes from gift card
recipients to gift card purchasers. A prohibition on post purchase fees will
prevent this loss of consumer welfare, and as businesses do not currently
have post-purchase fees on gift cards sold in Australia, banning the use of
these fees minimises the potential for regulatory cost.
2.147 Retailers and gift card scheme operators may have to wait longer
before they can make use of funds associated with unredeemed gift cards.
Businesses however noted that three years was a preferable option as it
allowed them to clearly identify a point at which they could write off gift
card liabilities.
Impact on Consumers
2.148 Consumers will experience the benefit of longer minimum
expiry periods. This reduces the likelihood that consumers will face
disappointment from expired gift cards in a short period of time. The
experience in the US following the introduction of minimum expiry
periods is that there was a significant reduction in breakage - Option 3 is
anticipated to have a similar impact in the Australian context.
2.149 As with Option 2, the benefits to consumers are largely a
transfer from business to consumers, however, this appears to be
appropriate given it is unfair on consumers for a business to receive
payment for a good or service that is never provided.
2.150 Currently in the Australian market gift cards are provided for
free, unlike in the US. If gift card scheme operators moved to introduce
fees for issuing gift cards, to account for a loss in revenue from lower
breakage, purchasing gift cards may increase in price. This would increase
a cost to consumers purchasing gift cards.
2.151 To the extent mandating a minimum three year expiry period
results in consumers holding onto gift cards for a longer period,
consumers' exposure to the risk of the business that issued the gift card
becoming insolvent increase. This could reduce some of the benefits
associated with Option 3, however, the impact is likely to be minimal.
39
New South Wales Fair Trading, Operation Fair Trading Results, 2012,
http://www.fairtrading.nsw.gov.au/pdfs/About_us/Operation_gift_card_results.pdf
48
Regulation impact statement
Net impact
2.152 Option 3 is the preferred option as it has a higher net benefit
than Options 1 and 2.
2.153 As with Option 2, Option 3 will benefit consumers and address
the problems associated with gift cards expiring before the consumer is
able to use the card. However, Option 3 does not face many of the
unquantifiable costs and practical challenges that would be incurred under
Option 2. For example, existing card technology enables the use of three
year expiry dates and would enable businesses to effectively manage their
liabilities on an ongoing basis.
2.154 While the benefits associated with a reduction in unredeemed
gift card balances effectively results in a transfer from businesses to
consumers, this outcome would increase fairness for consumers as the
benefit currently received by businesses is a payment for a good or service
that is never provided.
2.155 Option 3 would also result in a nationally consistent approach to
gift card expiry regulation and would prevent business from having to
transition to a new regime multiple times (i.e. update IT systems to
comply with the NSW regime and again for the national regime).
2.156 The benefits of nationally consistency will only be realised if the
details of the legislative amendments across states are consistent. This will
be particularly important when defining a gift card, so that the minimum
expiry date applies to a consistent set of gift cards. Consideration will be
given to this use in the legislative drafting process.
2.157 Option 3 is also preferred over the status quo. While Option 3
involves some short term transition costs, it avoids the ongoing
compliance costs and uncertainty for businesses associated with not
having a national approach. Option 3 also improves fairness for
consumers and will have broader benefits for the market over time by
improving consumer outcomes.
BENEFITS COSTS
• Consumers have lower • Increased costs to provide
breakage rates as longer information to consumers on expiry
minimum expiry periods periods.
provide consumers with more
time to use gift cards.
• Nationally consistent • Possible IT changes to allow for
approach to gift card expiry longer expiry periods.
regulation.
49
Treasury Laws Amendment (Gift Cards) Bill 2018
BENEFITS COSTS
• Redesign of gift cards and
replacement of gift card stock
(reduced significantly by a
12 month transitional period).
• Possible costs to accounting
systems to allow for liability from
gift cards to be carried for a longer
period of time.
• Gift card scheme operators may
introduce fees for schemes as
breakage rates lower.
• Possible price increases to
purchasing gift cards as businesses
pass on fees.
Compliance Costs
2.158 A minimum three year expiry period is estimated to result in
initial compliance costs of approximately $46 million. These costs are
associated with IT system changes, reprinting and redesign costs,
accounting system changes and staff training costs. This policy option is
also expected to attract ongoing disclosure costs of around $5 million per
year. These ongoing disclosure costs are derived from the time taken by
an employee to meet disclosure arrangements at the time of sale.
Evaluation
2.159 Consumers are currently experiencing detriment associated with
gift cards expiring before they have the opportunity to redeem the balance
on the card and businesses are facing a complex regulatory environment,
with different rules in different States and Territories.
2.160 The options in this RIS seek to address these problems by:
• ensuring that consumers who purchase and receive gift cards
have a reasonable period of time to use the gift card before it
expires, leading to a reduction in breakage;
• providing businesses with certainty through a nationally
consistent approach to gift card expiry regulation; and
• continuing to promote a viable gift card market that meets the
needs of consumers.
2.161 The three options outlined in this RIS each achieve some of
these objectives to some degree, however, on balance Option 3 most
adequately addresses the problem and meets the desired objectives.
50
Regulation impact statement
2.162 In regards to objective 1, both Options 2 and 3 would address
this objective by providing a reasonable period of time for a consumer to
utilise a gift card before it expires. However, Option 1 of maintaining the
status quo would not meet this objective as there would continue to be no
minimum expiry periods for gift cards. Evidence from the United States
suggests that implementing Option 3 would result in a significant
reduction in breakage. Option 2 would certainly provide a sufficient
period of time for consumers to use gift cards, as there would be no expiry
date.
2.163 In regards to objective 2, Options 2 and 3 have the potential to
achieve a nationally consistent approach. However, as Option 2 is
inconsistent with the current approach in NSW and the proposed approach
in SA, many of the benefits associated with national consistency would
not be realised under Option 2 as businesses would need to incur
compliance costs to transition to their systems to accommodate no expiry
period. Option 1, the status quo, would not lead to national consistency, as
it would maintain the current piecemeal approach to gift card expiry
regulation.
2.164 In regards to objective 3, all three options are likely to continue
to allow the Australian gift card market to exist. However, Option 2 is
likely to present a range of challenges for businesses, such as technical
issues associated with the need for an expiry period using certain payment
technology and the need to manage liabilities on balance sheets for an
indefinite period. These factors suggest that Option 2 could have a
negative impact on the gift card market. In contrast, Options 1 and 3
would not face the challenges associated with Option 2.
2.165 Option 3 is the preferred option.
51
Treasury Laws Amendment (Gift Cards) Bill 2018
Policy Objective Option 1 Option 2 Option 3
Reasonable period of time to use
the gift card before it expires, No Yes Yes
leading to a reduction in breakage;
Provide businesses with certainty Potential but
through a nationally consistent No Inconsistent Yes
approach with NSW
Yes, but
Promote a viable gift card market with
Yes Yes
that meets consumer needs technical
challenges
Consultation Summary
Process
2.166 On 2 May 2018, Treasury released a Consultation Regulatory
Impact Statement examining gift card expiry dates in Australia and
undertook extensive consultation. The consultation period closed on
30 May 2018. The consultation Regulatory Impact Statement posed a
number of questions to stakeholders to assist in better defining the
problem and to analyse the costs and benefits of different policy options.
2.167 Treasury conducted an industry roundtable with key
stakeholders in Sydney on 4 May 2018 and conducted teleconferences
with 27 stakeholders over the course of the consultation period. Treasury
received 20 formal submissions to the consultation process and 25
informal consumer comments.
General findings
2.168 There was strong support for a national consistent approach to
gift card expiry, rather than having separate State laws. While some
businesses and business group supported no restrictions on expiry dates
and some consumers and consumer advocates supported a prohibition on
expiry dates, generally there was support for a three year minimum expiry
date.
Consumers and Consumer Advocates
2.169 Consumers and their advocates supported a ban on gift card
expiry, noting that expired gift cards represent real financial losses to
52
Regulation impact statement
consumers. One group cited a member survey finding that one in three
respondents had a gift card expire before use.
2.170 Consumer advocates emphasised that consumers should receive
value for the money they have invested and that that value should not be
time limited. A nationally consistent 3-year minimum expiry period was
seen as an improvement on the status quo and supported as the next best
policy option.
2.171 Consumer advocates supported prominent and legible
disclosures on cards and associated materials of important consumer
information, such as the value and the expiry date.
2.172 Some advocates sought a ban on post purchase fees for activities
such as card activation, account keeping, balance inquiry, and
inactivity/dormancy. These fees were noted to undercut the benefits of
extending mandatory minimum expiry periods.
National Retailers and representatives
2.173 Most national retailers are already moving to three year expiry
dates or no expiry date. In some cases, this change has been promoted by
the NSW legislation, in others, it has been a voluntary decision of the
retailer for competition and customer service purposes.
2.174 National retailers noted that the gift card market is growing and
that gift cards are becoming more popular. Breakage rates (unredeemed
balances) were noted to be low, in the order of three per cent for some
schemes.
2.175 National retailers highlighted the importance of developing
nationally consistent legislation on gift card expiry to facilitate trade and
commerce across borders. They encouraged the Commonwealth to work
closely with the States and Territories.
2.176 The need to prevent conflicting compliance regimes across
jurisdictions was also noted by industry associations. Some industry
associations do not support regulation. The ARA and the Restaurant and
Catering Industry Association prefer a voluntary code of conduct, while
the Caravan Parks Association of Queensland supports three-year
minimums as the next best policy option.
2.177 National retailers noted the importance of a long transitional
period, preferably up to 12 months (some up to 18 months), so that the
replacement of cards, update of systems and training of staff could occur
in a planned fashion.
2.178 Retailers highlighted the large costs associated with
implementing a change to gift card expiry dates.
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Treasury Laws Amendment (Gift Cards) Bill 2018
2.179 Retailers identified that promotional gift cards were used to
stimulate demand for goods services in low demand periods.
Small Businesses and Small Business Advocates
2.180 Small business advocates noted that gift cards and special offers
(such as discount vouchers) were important tools used to promote small
businesses and to manage stock levels. Most of these were in physical
(paper) form.
2.181 Some small business advocates acknowledged that there needs
to be a balance between the interests of consumers and the interests of
small businesses. Some were supportive of a three-year minimum expiry
date while others favoured 12 months. National consistency was identified
as providing certainty for these businesses and reducing burdens
associated with informing themselves of, and complying with, different
state laws.
2.182 Small business advocates did not support a ban on the use of
expiry dates, noting that carrying liabilities associated with gift cards has
an impact on small business cash flows. Small businesses are also
required to account for the liability until it is expended, which requires
them to cover those liabilities with adequate assets.
2.183 One small business suggested that 12 months was ample time to
use a gift card in its industry and highlighted the need to produce card
stocks well in advance to maximise savings on card production. This was
noted to create a risk of significant stock loss.
2.184 Exemptions for gift cards associated with specific or time
limited events were identified to be important to some industries, such as
live performance. Advocates also noted that the costs of providing
specific goods and services can increase over time and may be delivered
at a loss if expiry dates were prohibited. Conversely, advice was provided
that the value of the good or service can also devalue for the consumer
(such as where an accommodation voucher is for a fixed value and the
price of the accommodation increases over time).
2.185 One advocacy group sought a transitional period of 6 months to
allow changes to be made to accounting systems, budgeting practices,
website purchasing processes and physical voucher stock.
Gift Card Scheme operators
2.186 Gift card scheme providers highlighted the variety of uses of gift
cards such as customer and staff rewards, prizes, trade incentives and cash
back and sampling offers. Some gift card schemes noted that they operate
in the business to business market, with none sold directly to individual
consumers. These schemes may have shorter expiry periods that
commence when the scheme operator sells cards to a business for
54
Regulation impact statement
resupply or gifting, rather than when the end user receives the card.
Upfront fees are charged for the initial sale rather than to the end user.
2.187 Some scheme providers noted that shorter expiry dates were
necessary to the operation of their schemes as, unlike schemes run by
retailers, they did not make a margin on sales of goods (one used an
upfront fee to recover its costs). Unredeemed balances provided that
margin. Scheme operators noted breakage rates of approximately three per
cent.
2.188 One scheme operator supported various exemptions for payment
system cards, business to business cards, cards sold at a discount (as the
consumer receives an upfront benefit), as well as marketing and rewards
cards. It did not regard a prohibition on expiry dates as being viable for its
business and suggested that a three-year expiry period would necessitate
charging post-purchase fees and would require a three-year
implementation period.
Payments System Operators
2.189 Payment system operators generally support a national uniform
approach to any regulation, noting that most gift cards issued in Australia
are able to be used nation-wide. One noted that segmented and
inconsistent regulation on a state-by-state basis is both confusing for
consumers, and administratively and economically burdensome for
business.
2.190 Some were supportive of a three-year minimum expiry date over
other options, provided that the types of cards to be regulated are clearly
defined.
2.191 Operators also advised that point of sale networks reject cards
that have no expiry date. Further, expiry dates are encoded onto the
physical card itself and can't be adjusted.
2.192 Some payment system operators noted that post purchase fees
can include amounts debited to cards for currency conversion on overseas
purchases. Operators also noted that upfront fees make smaller value
cards less attractive to consumers.
2.193 Operators noted that any consideration of regulatory changes
should include how current card stocks would be managed. Stock includes
existing cards held by card manufacturers, and stock in stores or offices
ready for distribution. One operator suggested a transitional period of two
years for most gift card holders to run down stock levels.
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Treasury Laws Amendment (Gift Cards) Bill 2018
IMPLEMENTATION AND REVIEW
2.194 The proposals in this Regulation Impact Statement would be
implemented via amendments to the Australian Consumer Law. The
Australian Consumer Law is set out in a schedule of the Competition and
Consumer Act 2010 and is applied by each state and territory in the
application Acts in each State and Territory. The precise drafting of the
amendments would be subject to legal advice on appropriate wording.
Under the intergovernmental agreement governing the Australian
Consumer Law, the proposed amendments would require a vote of
Consumer Affairs Ministers.
2.195 Implementing the preferred option (Option 3) would involve:
• mandating minimum three-year expiry periods for gift cards;
• prohibiting post-purchase fees;
- including fees specific to the operation of cards (such as
activation, account keeping, balance checking and
inactivity/dormancy fees);
- excluding fees specific to purchase transactions when
consumers use card (such as currency conversion fees,
booking fees and payment surcharges);
• requiring that the expiry date be prominently displayed on
gift cards in a manner that makes clear that it is the expiry
date; and
• consideration of appropriate exemptions.
2.196 In order to provide businesses with time to update their systems
and run down their stock of gift cards that are not compliant with Option
3, it is proposed that the reforms come into effect around 12 months after
legislation to mandate minimum three year expiry dates is made. While
some businesses suggested that a longer time period is required, most
were supportive of a 12 month transition period.
2.197 During the legislative drafting process, consideration will be
given to ensure that there is a nationally consistent approach to gift card
expiry. For example, there will likely be technical differences in wording
in the Commonwealth legislation in comparison to the existing NSW
legislation. Care will be taken to ensure that, to the extent possible, similar
gift cards are treated in the same manner across Australia.
2.198 The Australian Consumer Law is enforced by a multiple
regulator model. As such, at the Commonwealth level the new gift card
requirements will be administered and enforced by the Australian
Competition and Consumer Commission (ACCC). At the State and
Territory level, the relevant regulators will be:
56
Regulation impact statement
• New South Wales -- NSW Fair Trading
• Victoria -- Consumer Affairs Victoria
• Queensland -- Queensland Office of Fair Trading
• South Australia -- Consumer and Business Services
• Western Australia -- Western Australia Consumer Protection
(Department of Commerce)
• Tasmania -- Consumer, Building and Occupational Services
• Northern Territory -- Northern Territory Consumer Affairs
• Australian Capital Territory -- Access Canberra
2.199 Treasury, the ACCC and other Consumer Affairs Australia and
New Zealand members will monitor the impact of the amendments as part
of their ongoing monitoring of the Australian Consumer Law, to ensure
the amendments appropriately address the problems identified in this
Regulation Impact Statement.
57
Chapter 3
Statement of Compatibility with Human
Rights
Prepared in accordance with Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011
National gift card reforms
3.1 The Bill is compatible with the human rights and freedoms
recognised or declared in the international instruments listed in section 3
of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview
3.2 The Bill amends the Australian Consumer Law (ACL),
Schedule 2 to the Competition and Consumer Act 2010, to provide gift
cards with a minimum three year expiry period; require disclosure of
expiry information on gift cards and ban the charging of certain
post-supply fees.
Human rights implications
3.3 The Bill imposes strict liability in relation to the:
• failure to supply a gift card with a minimum three year
expiry period;
• failure to disclosure the expiry date of the gift card on the gift
card itself;
• failure to supply a gift card with terms and conditions that
allow for a post-supply fee to be charged; and
• charging of post-supply fees.
3.4 The application of strict liability, as opposed to absolute
liability, preserves the defence of honest and reasonable mistake of fact to
be proved by the accused on the balance of probabilities. This defence
maintains adequate checks and balances for persons who may be accused
of such offences.
3.5 The penalty provisions contained in the Bill are consistent with
existing penalties in the ACL for similar offences. The strict liability
offences are appropriate and consistent with the requirements of the
Attorney-General's A Guide to Framing Commonwealth Offences,
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Treasury Laws Amendment (Gift Cards) Bill 2018
Infringement Notices and Enforcement Powers, September 2011 edition.
For instance, the offences are not punishable by imprisonment and the
fines for the offences do not exceed 60 penalty units for persons other
than a body corporate or 300 penalty units for a body corporate.
3.6 Strict liability offences are appropriate in this circumstance, as it
is necessary to strongly deter misconduct that can have serious detriment
for consumers. Strict liability offences also reduce non-compliance, which
bolsters the integrity of the regulatory regime enforced by the ACCC.
Strict liability is particularly beneficial to regulators as they need to deal
with offences expeditiously to maintain public confidence in the
regulatory regime.
3.7 The civil penalty provisions contained in the Bill should not be
considered 'criminal' for the purposes of human rights law. While a
criminal penalty is deterrent or punitive, these provisions are regulatory
and disciplinary. Further, the provisions do not apply to the general
public, but to a sector or class of people who should reasonably be aware
of their obligations under the law (e.g. companies and small business
owners who supply gift cards to consumers). Imposing civil penalties will
enable an effective disciplinary response to non-compliance. Finally, the
civil penalties are for small amounts, with no sanction of imprisonment
for non-payment of the penalty.
Conclusion
3.8 The Bill is compatible with human rights as the strict liability
offences are appropriate and consistent with the requirements of the
Attorney-General's A Guide to Framing Commonwealth Offences,
Infringement Notices and Enforcement Powers, September 2011 edition.
60