Gift cards are one of the most popular gifts during the holiday season. Whether you are buying them for friends and family, or a lucky recipient, it is helpful to know that there is legislation in place to protect consumers and prevent retail outlets from eating away at your generous gift by tacking on exorbitant fees or unreasonable expiry dates.
Statutory Scheme
The Consumer Protection Act, 2002 (the “CPA”) [1. Consumer Protection Act, 2002, SO 2002 c 30] is a comprehensive statute, designed to protect consumers by ensuring they are able to make informed purchasing decisions and prevent abusive practices by retailers and other “suppliers.” The CPA defines a “supplier,” as a person who is in the business of selling, leasing or trading in goods or services or is otherwise in the business of supplying goods or services. For the purposes of the CPA, a supplier can include an agent of the supplier and a person who holds them self out to be a supplier or an agent of the supplier. For the purposes of understanding the rules surrounding gift cards, in general terms, the supplier will be the vendor, or the store at which the gift card is purchased.
Gift cards are addressed in the regulations enacted under the CPA. The regulations define a gift card as a voucher in “any form.” [2. O Reg 17/05, s. 23] This can include an electronic credit or written certificate that is issued by a supplier under a gift card agreement, and that the holder is entitled to apply towards purchasing goods or services covered by the voucher. It is important to remember therefore, that just because a vendor or supplier does not provide a gift card purchaser with a physical “card”, if the credit or certificate fits the definition of “gift card” under the CPA, the rules will still apply.
Can a gift card Expire?
The short answer in most cases is no. In general, the CPA prevents suppliers from:
- imposing an expiry date on a gift card;
- issuing a gift card for less than the value paid for the gift card; and
- charging a fee to the holder of the gift card for anything in relation to the card (other than a fee for lost or stolen cards, or to have the card customized, for example). [3. O Reg 17/05, ss 25.3-25.4(1)]
This means that, in general, gift cards cannot expire, and suppliers cannot impose “dormancy” (where the card diminishes in value over time if the card is unused), or “administration” fees on gift cards. As further described below, however, there are some circumstances in which expiry dates and other fees may be permissible.
Mall Gift Cards, or “Open Loop” Gift Cards
There are certain exceptions and special rules for certain types of gift cards. Some gift cards, such as those for shopping malls, for example, are applicable to multiple unaffiliated sellers, that is, many different retailers. Under the CPA, this type of gift card is defined as an “open loop” gift card agreement. Sellers of open loop gift cards, like your favourite shopping mall, are permitted to charge a fee of up to $1.50 when the gift card is purchased. Open loop gift cards may also be subject to dormancy fees of up to $2.50 per month once 15 months has passed (from the end of the month in which the gift card was purchased). These dormancy fees can eat away at the gift card value over time, which is an important consideration for some consumers.
Interestingly, you can request an extension of an open loop gift card by writing to the supplier in the 15th month. This will help you avoid fees until 18 months has passed (from the end of the month in which the gift card was purchased). Once the extension period has passed however, dormancy fees may again be applied such as to diminish the value of the gift card over time.
If such fees apply, they must be indicated on the card, and must be disclosed to the consumer when the gift card is purchased.
Pre-Paid Credit Cards
Pre-paid credit cards, such as those offered by major credit card companies, are not considered gift cards under the CPA and are generally exempt from the rules. Such pre-paid credit cards may be purchased where other gift cards are sold, but are often subject to additional fees, and differ from other store gift cards for this reason.
Other Types of Gift Cards
Gift cards that are issued for a specific good or service or a gift card issued for a charitable purpose are also distinguished under the CPA. Special rules apply to these types of gift cards, and it is therefore important to understand the type of card you wish to purchase or redeem, particularly if you suspect you have been improperly charged a fee or the seller has imposed a restriction on your redemption of the gift card in violation of the CPA. For these types of cards, for example, suppliers may be permitted to attach an expiry date to a specific service or good being offered.
Conclusion
A cornerstone of the CPA is disclosure. The CPA focuses on ensuring that suppliers provide all relevant information to consumers who are purchasing goods or services, including price, fees, and any restrictions. Gift cards are a unique consideration under the CPA. While it is true that, generally speaking, expiry dates and activation fees on gift cards are impermissible under the Act, there are some exceptions for a savvy consumer to be aware of. Additionally, there may be restrictions on the gift card redemption or other considerations to factor in when redeeming or purchasing a gift card. While some general information is provided in this article, there is no substitute for the tried and true rule of thumb: if you’re unsure about whether a particular seller imposes restrictions or fees in relation to their gift cards, ask before you purchase.