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Part VII - Conclusion

Date

Under its terms of reference, CCAAC was required to explore and develop options to better protect consumers who purchase or receive gift card products. As part of the review, CCAAC has examined issues in relation to the purchase and use of gifts cards in Australia as well as the nature and cause of any consumer detriment that has been found. This has been informed through the views of stakeholders affected by gift card sale practices as well as the effectiveness of international regulatory approaches.

Within the Issues Paper released for public consultation, CCAAC presented a framework through which these issues would be examined. The Issues Paper noted that establishing the cause and degree of any consumer detriment is important before determining whether a policy response is required. It also noted that supporting evidence would assist in justifying any possible regulatory response.

The OECD Consumer Policy Toolkit has been used to better understand the issues as well as any need for options to address any consumer detriment arising from the sale of gift cards. In doing so CCAAC has explored consumer awareness of gift card terms and conditions, how and why gift card terms and conditions are applied as well as the accounting, record keeping and administration procedures that support the administration of gift card facilities.

CCAAC notes that gift cards are a market response to a consumer demand.

CCAAC acknowledges that while all terms and conditions are generally presented in a comprehensive manner, many consumers may not take the time to examine the details of the gift card contract. Gift card issuers have the responsibility to ensure that consumers have access to an appropriate level of information about the products that they buy and detailing terms and conditions on a website or on an associated document may not be sufficient in all circumstances.

Some gift cards are promoted as being 'as good as cash' and consumers may sometimes infer this from the messages that they receive from gift card issuers. Where the terms and conditions make them substantially different to cash, there is cause for the consumer to mistake how they work. Consequently, gift card issuers should consider how their broader marketing strategy is likely to shape consumer perceptions and understandings of how these products work. The existing consumer law framework may assist in ensuring that the appropriate information is provided to consumers.

Despite the concerns around the marketing of gift card products or disclosure of terms and conditions, CCAAC did not observe any structural market failures that warrant a regulatory response. CCAAC has found that there are clear instances of personal consumer detriment, but these do not justify a regulatory response. In particular, in determining this, CCAAC has considered the broader welfare considerations of the gift card market, and whether regulatory options are likely to provide meaningful assistance to consumers. Policy options such as requiring minimum expiry dates are unlikely to substantially increase redemption rates and may even work against consumers as they may be less likely to immediately redeem their gift cards.

It appears that many of the concerns relating to gift card products originate from recent insolvencies of notable Australian retailers. While it is understandable that consumers may be frustrated by this, it is not clear that these issues can be easily resolved. CCAAC notes that there are many individuals who may suffer losses due to a business going into administration. Gift card holders, as unsecured creditors, may be unlikely to receive any proceeds from a liquidation process. CCAAC is unaware of any compelling arguments suggesting that gift card holders should be provided with priority status over other creditors. In addition, CCAAC finds that requiring gift card issuers to establish trust accounts to guard against losses to gift card holders may not be the most appropriate mechanism to protect gift card holders.

CCAAC has been asked to consider what practical options could be used to assist consumers. Australia's existing consumer protection framework may benefit consumers where gift cards are issued in accordance with consumer laws. In particular, the misleading and deceptive conduct provisions mean that gift card issuers cannot mislead consumers about the products which they are offering. CCAAC has found that most Australian retailers have a customer service focus and are likely to attempt to resolve a consumer complaint directly with the consumer. Where this does not occur, ACL regulators can offer alternative options for redress. On the other hand, a strategic non-regulatory response based on existing consumer education materials and activities could provide useful support to consumers when purchasing and using gift cards. CCAAC also encourages the industry to consider how participation in the ePayments code could be promoted. Industry should also consider how best practice terms and conditions could be promoted to avoid further calls for a regulatory response and to improve consumer satisfaction.