Report finds gift cards not perfect

The Commonwealth Consumer Affairs Advisory Council (CCAAC) has found that whilst gift cards are generally beneficial for most users there are some persistent issues which cause consumer harm.

CCAAC’s report stated that ‘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’.

Despite this positive finding, however, the CCAAC did find 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’.

Whilst the majority of gift cards are redeemed shortly after purchase the CCAAC did hear of situations where cards were not redeemed and the value was lost through the expiration of the card.

The bulk of gift cards issued in Australia are for a period of twelve months from purchase, however there are examples of shorter periods . Whilst this practice may, and has, caused concern for some consumers the CCAAC found that applying a minimum expiry period would be an unfair burden on the industry and may result in unexpected consequences such as increased fees and charges.

Instead the CCAAC called for more consistency in the display of expiry dates, and in particular suggested that cards which have an expiry date shorter than twelve months should make this prominent on the card itself.

Aside from issues relating to the expiry date of gift cards, the CCAAC also found that consumers had concerns when considering the monetary worth of the cards.

Gift cards can be lost, stolen or damaged which may void their ability to be redeemed. Whilst these issues do cause detriment to consumers the CCAAC found that requiring issuers to maintain lists of cards to be able to replace them would place an undue burden and cause undesirable consequences to businesses and consumers.

Another issue regarding lost value for consumers was the usage of unspent money. This issue, however, is not one for which the CCAAC could find an easy and workable solution. The CCAAC stated that ‘while the transfer of unredeemed balances to the gift card issuer may be seen as an injustice to the consumer, it is unclear how these concerns can be resolved’.

The CCAAC found that if consumers were able to ‘cash out’ their gift cards this could lead to significant issues for the supplier, and so would not in the long run benefit the consumer. Rather the CCAAC recommended that more emphasis be placed upon encouraging consumers to spend their gift cards as soon after purchase as possible.

To mitigate the issues for consumers, the CCAAC recommended that Australian Consumer Law Regulators explore methods to promote consumer awareness and industry should develop and promote codes of best practice. The CCAAC found that these steps would allow the industry to minimise the detriment to consumers without significant unexpected consequences.

In releasing the report, the Commonwealth Government summed up the finding saying that  ‘CCAAC has encouraged industry to develop and promote best practice principles that support consumers when engaging with these products’.