NSW set to get new gift card laws following selective consultation

05 Oct 2017

  • Governance
  • Privacy and Compliance

The NSW Government is set to announce its new Gift Card laws that will require NSW businesses to extend the expiry date of gift cards to all NSW consumers to at least 3 years or face penalties of up to $11,000. The new laws are part of the ‘Consumers First’ policy by the Minister for Innovation and Better Regulation, Hon Minister Kean.

The proposed gift card laws include:
• a prohibition on, and fines for, supplying gift cards to NSW customers with an expiry date of less than 3 years;
• fines for refusing to redeem gift cards supplied to NSW customers that is presented within 3 years; 
• a prohibition on, and fines for, imposing administrative charges or fees for redeeming gift cards that reduces the redeemable value of gift cards; and
• other debit or credit ‘gift cards’, such as the visa prepaid gift card, will be exempt from the new laws.

The laws are only intended to apply for NSW customers, which raises a number of practical concerns:
1. Determining whether a person is entitled to the 3-year expiry period;
2. Operation of the laws across state borders; and
3. Compliance of online retailers and smaller businesses.

The announcement may come as a surprise to most businesses who likely were not aware of the NSW Government’s plans or the supposed issue with gift cards, as the NSW Government failed to adequately consult with businesses of all sizes.  While regulation is a fundamental task of the Government, it is important to remember that the goal of regulation is to enable fair, effective and efficient outcomes for people, businesses and the broader economy. 

Selective consultation

The NSW Government has shown a concerning approach to consultation.  To date, the NSW Government has not consulted widely on the proposed regulation, opting instead for a form of highly selective and confidential consultation.
This approach is even more concerning following the release of the Independent Review of the NSW Regulatory Policy Framework Draft Report in May 2017, which recommends that thorough consultation must begin early, before policy options have been defined.

To date, the NSW Government has not released a discussion paper, called for feedback or submissions, or engaged in a meaningful way with businesses of all sizes. It has instead formed a policy view and invited select groups to confidential meetings.

And in a time where businesses experience shrinking budgets and larger targets, it is vitally important to be afforded with an opportunity to assess and discuss the potential impacts of additional regulation. 

Consultation matters

Consultation plays a vital role in ensuring good policy and effective regulation.  When consultation is done behind closed doors, the full impact of any new regulation cannot be sufficiently assessed or identified, and neither can a proper cost-benefit analysis be completed. 

Before policy options are defined, consumers and industry want:
1. Evidence that consumers currently experience a systemic disadvantage that must be addressed, and
2. Evidence that the proposed policy to address the issue is the most effective and efficient available.

Being an ADMA member means that your customers’ best interests are front and centre of what you do.  There is no reason to believe, or evidence that proves, the case is any different when it comes to customer engagement through gift cards.  In fact, the Commonwealth Consumer Affairs Advisory Council released a report in 2012, which found that while its review uncovered some difficulties with gift cards, it was “unable to find overwhelming evidence of structural consumer detriment warranting a regulatory response”

If the NSW Government is aware of any evidence that warrants a regulatory response, it should attempt to constructively engage with industry to address these problems in a manner that will not increase regulatory complexity and compliance costs for businesses. 

We know from experience, that regulation is the least preferable option – it adds to regulatory complexity, it increases compliance costs, the processes for consumers to seek redress are long, and - in this particular instance - the regulation may even confuse consumers as to their rights and result in unintended consequences.

ADMA will continue to push for more thorough, open and collaborative consultation with the NSW Government. In the meantime ADMA will oppose the new gift card laws until the NSW Government undertakes proper consultation, including investigation and consideration of a range of options.

We call on the NSW Government and the Minister for Innovation and Better Regulation to reconsider its approach to consultation so that NSW has “Better Regulation” for individuals, businesses and the NSW economy.

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