September 21, 2009

Gift Card Law in Ontario

Gift cards have become very popular for retailers and their customers in Canada in recent years. By 2006, 82% of retailers in Canada had begun the practice of offering gift cards, attracting consumers who have become increasingly interested in this easy gift-giving option.

Although retailers have been happy to respond to this recent purchasing trend, it has also presented a number of challenges. Namely, retailers are presented with the problem of how to encourage the consumption of these cards within a reasonable time period. Their early response to this problem has been to impose expiry dates or fees on unused balances over time.

The Ontario government amended the Consumer Protection Act in 2007 to address retailers’ gift card practices in a number of ways:

1. Expiry Dates
The new legislation prohibits retailers from imposing expiry dates on gift cards that hold a specific dollar amount. A gift card which contains an expiry date is effective as if the expiry date was not present on the card. However, gift cards for specific goods or services (for example, a dinner for two) are exempt from the expiry date prohibition even when there is a specific dollar amount included with the card.

2. Fees
Fees are generally restricted from being imposed on gift cards but can be imposed in instances where a customer is seeking to customize a card or replace a lost or stolen card.

Dormancy fees are permitted when the card applies to purchases of products or services from multiple unaffiliated retailers. Dormancy fees cannot be charged for the first 15 months. In addition, the fees cannot exceed $2.50 per month. The fee information must be contained on the back of the card. The front of the card must direct the customer to read the fee information on the back of the card. The retailer is also obligated to disclose the information pertaining to the 15 months and $2.50/month rule.

3. Disclosure
Retailers are obligated to fully and prominently disclose on the card all information pertaining to the conditions and terms of the card. For example, a retailer must disclose conditions relating to limits imposed on the redemption of the card. Other examples include: a retailer must disclose if the card cannot be exchanged for cash, the retailer is not responsible for lost cards, or returned purchases are refunded back onto the card.