Since the mid-1990s, gift cards have become an increasingly popular product for Australian consumers. While gift card use continues to grow, concerns about the risks for consumers who purchase and receive gift cards have been raised.
There is evidence of a vibrant Australian gift card market which suggests that gift cards are a popular choice for consumers and that many Australian retailers benefit from offering gift card products. In addition, it is evident that the market is growing and that new gift card forms and functions are emerging.
CCAAC has examined issues relating to gift cards by applying the OECD Consumer Policy Toolkit and supports it as a framework when assessing consumer problems and evaluating policy options.
Submissions from individual consumers raised concerns around some terms and conditions that apply, particularly where they restrict the gift card holder's use of the gift card. This included concerns about expiry dates, receiving change as well as fees and charges that may apply. Issues related to the administration of gift card programs—including the replacement of gift cards, the use of unspent monies and gift card holder rights in the event of insolvency—were also raised.
Some consumers have suggested that regulation should be introduced to require a minimum expiry date while others have suggested that consumer rights in the event of insolvency should be enhanced.
CCAAC found that there is a level of actual consumer detriment associated with the gift card market in relation to the terms and conditions of gift cards, particularly in relation to the expiration of gift cards and to a lesser extent some other terms and conditions.
One factor that contributes to the detriment is that the consumer who purchases the gift card is usually not the consumer who will use the card. Issuers need to ensure that they have done as much as possible so that the end user of the gift card is aware of any limitations on its use (including the expiry date).
It has not been possible to quantify the precise level of detriment based on the information available.
The question to be considered by policy makers is whether there are any regulatory or other responses to these areas of detriment which are likely to provide net benefits to consumers.
In relation to expiry dates, there is no strong evidence that setting a mandatory minimum expiry date would assist many consumers. CCAAC considers that for many issuers it would be unreasonable to set an expiry date of less than 12 to 15 months. However, shorter expiry dates may be reasonably necessary to protect the legitimate commercial interests of some, mainly small businesses. In all cases, CCAAC considers that gift card issuers must do as much as they can to ensure that end users are made aware of the expiry date as well as any other important terms.
In situations of insolvency, there are often insufficient funds to meet the claims of all creditors. While it is unfortunate that some consumers have experienced losses where a gift card issuer has become insolvent, CCAAC believes that the holders of unredeemed gift cards should be treated equally with other unsecured creditors. While there have been some recent high profile retailer insolvencies, insolvency risks for gift card holders are relatively low.
CCAAC encourages industry to develop and promote best practice principles that support consumers when engaging with these products. To further promote industry best practice, CCAAC encourages industry participation in the ePayments code. CCAAC also encourages Australian Consumer Law (ACL) regulators to continue to explore how consumer awareness can be promoted to assist purchasers and holders of gift card products. Consumer Affairs Australia and New Zealand (CAANZ) and its advisory committees are encouraged to develop a coordinated strategic non-regulatory response, based on the findings of the CCAAC review into gift cards in the Australian market.