It’s my birthday month, and with the holiday season approaching too, the topic of gift cards has been on my mind. Gift cards have become a staple in the gifting world, offering flexibility and choice for recipients while boosting sales for businesses. However, beneath the temptation of an easy gift and an easy sale lies a layer of legal intricacies that small business owners in Australia must navigate.

Today, I want to delve into the legal requirements surrounding gift cards, considering both bricks-and-mortar stores,  e-commerce and service providers, to provide insights on managing gift cards as an option in your small business.

Legal Requirements for Gift Cards: Key Considerations

As with anything you sell, small business owners need to be well-versed in the legal requirements tied to gift cards. These regulations are in place to ensure fairness and transparency for both businesses and consumers. These legal considerations apply to small and larger businesses – you don’t get to avoid your responsibilities in this area because your business is a startup or super-small.

Validity Period and Expiry Dates:

Australian Consumer Law mandates a minimum validity period of three years for gift cards from the date of purchase. This affords recipients ample time to redeem their value. However, businesses can choose to extend this period, offering even more flexibility. You must prominently display the expiry date as either the full date, or as a period of time. If there is no expiry date, you must also state that explicitly.

TIP: If someone purchases a gift card from you on 1 December 2023 but doesn’t give the gift card until a few months later, the expiry date is three years from the purchase date, not the date the gift was given.

There are a few circumstances where the three year period does not apply, as advised by Australian Consumer Law, including for gift cards that are:

• able to be reloaded or topped up
• for a good or service available for a limited time where the card or voucher expires at the end of that period (e.g. entry to a concert or museum exhibition)
• supplied to a purchaser of goods or services as part of a temporary marketing promotion (e.g. a wine voucher valid for one month that is mailed to a consumer as a free bonus with a purchased item and was not part of the purchase offer)
• donated free of charge for promotional purposes (e.g. a local shopping centre has a one-day marketing promotion where each visitor to the centre on that day is handed a $20 gift card that is valid for use at any store in the centre for that day only)
• -sold for a particular good or service at a genuine discount (e.g. $50 card for salon service valued at $100)
• supplied as part of an employee rewards program
• given as a bonus in connection with a purchase of a good or service for use in the same business (customer loyalty programs)
• second-hand gift cards
• part of a temporary marketing promotion (e.g. customers buy a certain product from Business A, which provides a $50 voucher to use at Business B).

Terms and Conditions:

Clear and accessible terms and conditions are essential. Customers should be informed about expiry dates, usage restrictions, and any potential fees associated with the gift card at the time of purchase.

TIP: Get your gift card and sale terms and conditions written or reviewed by a small business lawyer like me!

Additional Fees:

Businesses are prohibited from charging any post-purchase fees beyond the initial purchase price of the gift card. This includes fees for activation, balance checks, or redemption.

There are limited occasions where this ban does not apply, including:

• international transaction fees
• booking fees (which should be covered in your terms and conditions of sale)
• relevant payment surcharge fees and
• a fee for replacing lost of stolen cards.

To be clear, a business can still charge an upfront fee for gift card sales.

Cash Redemption:

If the balance on a gift card falls below $10, businesses may be required to allow customers to redeem the balance for cash upon request. This is something to be clearly stated in your terms and conditions.

Non-Transferability:

Typically, gift cards are non-transferable. This means they cannot be sold, assigned, or transferred to another person. Again, this should be clearly stated in your terms and conditions.

Purchasing Format:

Gift cards hold value across both brick-and-mortar stores and e-commerce platforms. Regardless of the business model, adherence to legal requirements remains paramount. Whether your customer prefers to walk into your store or browse online, the gift card experience should be consistent, transparent, and legally compliant.

What if my business is a franchise?

Franchise businesses often come with unique considerations regarding gift cards. Questions arise about whether gift cards apply across all franchises or are specific to each location. To ensure consistency and compliance, it’s recommended that franchisees adhere to the same gift card regulations. This not only maintains customer trust but also streamlines business operations.

TIP: Your franchisor may have specific policies regarding gift cards, which you should address with them.

What happens if I hold a sale?

As you prepare for the holiday season, strategically incorporating gift cards into your sales strategy can have a significant impact. Consider offering special deals or discounts for gift card purchases, enticing customers to buy now and redeem later. However, be mindful of potential limitations or expiry dates that might apply to these promotional gift cards.

You may choose to exclude gift cards from your sales, which is acceptable so long as your sale terms and conditions clearly state the terms of the exclusions.

What are the penalties if I get it wrong?

The penalties for breaches of these laws are significant, with a possible $30,000 fine for a body corporate, or $6,000 for individuals.

The Australian Competition and Consumer Commission (ACCC) can also issue an infringement notice, which is 55 penalty units (currently $11,500) for a body corporate and 11 units (currently $2,420) for persons other than a body corporate.

New South Wales and South Australia both also have State laws regarding gift cards, which you should refer to if doing business in these states.

Gift cards are more than just tokens of generosity; they’re powerful tools for small businesses. As we celebrate birthdays, plan for Black Friday/Cyber Monday and look ahead to Christmas, understanding and complying with legal requirements surrounding gift cards is essential. By offering transparent terms, upholding validity periods, and maintaining legal compliance, you ensure a positive experience for both your customers and your business. Remember, the holiday season brings opportunities, and well-managed gift card offerings can significantly boost sales and enhance customer loyalty.

If you’re a small business owner in Australia, ensuring your gift card policies are legally sound and customer-friendly is a must. Take the first step to ensure compliance by reaching out to Love Your Legals for a complimentary 10-minute call. Let’s discuss your gift card policies, address your questions, and explore how you can create a seamless and compliant gift card experience for your customers.

 

Source: Australian Consumer Law [23 August 2023] https://consumer.gov.au/new-gift-card-laws