In peak summer, the holiday season enjoyed months ago is likely just a distant memory, and any gift cards that you may have been fortunate enough to receive may still be floating around your wallet, ready to be redeemed. As consumers contemplate how to make room in their overcrowded wallets by using the money on their gift cards, and as the next holiday season comes into view, businesses issuing gift cards should be aware of the relevant rules and their continuing obligation to honour a customer’s right to use most gift cards that have a remaining balance. In particular, as a result of legislation enacted in British Columbia and other provinces, gift cards, or “prepaid purchase cards” as the legislation refers to them, are not allowed to have an expiry date.
In British Columbia, the rules governing gift card expiration are outlined in the Business Practices and Consumer Protection Act and an associated regulation called the Prepaid Purchase Cards Regulation. Under the Business Practices and Consumer Protection Act, a business cannot issue a prepaid purchase card with an expiry date. However, the Prepaid Purchase Cards Regulation allows for some narrow exceptions to this rule. Under this regulation, a prepaid purchase card may have an expiry date if it fits into one of the following categories:
- A prepaid purchase card that is issued or sold for a specific good or service;
- A prepaid purchase card that is issued or sold for a charitable purpose; or,
- A prepaid purchase card that is issued or sold for a marketing, advertising or promotional purpose to a person who provides nothing of value in exchange for the card, or purchased the card for an amount less than its full monetary value.
For businesses, there is not an abundance of guidance on how to ensure compliance with these exceptions; for example, it is not clear how specific a good or service needs to be in order for a gift card designated for the good or service to qualify for the first exception. For some guidance, the Financial Consumer Agency of Canada describes a gift card for a haircut at a hair salon or barbershop as a gift card for a specific service. At the same time, a gift card for a predetermined amount at that same hair salon or barbershop would almost certainly not qualify.
Another rule in the Business Practices and Consumer Protection Act mandates that suppliers of prepaid cards must provide information on restrictions and terms and conditions to purchasers of prepaid cards; that disclosure should align with the above exceptions.
Even where an expiry date is not permitted, the right to redeem gift cards is not invulnerable. A gift card is effectively an unsecured claim on the business, and in times of economic upheaval, such as those we currently live in, may be subject to credit risk based on the issuer’s solvency. If a company becomes insolvent, owners of gift cards issued by that company will have to compete with other creditors to redeem the value on their prepaid cards, putting their right to use the gift cards in jeopardy. While gift cards have been an effective way for some businesses to obtain cash in a difficult retail environment, businesses should prepare for a potential increase in gift card redemptions as COVID-19 continues to impact the industry.
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