Note: The rules and law may have changed since this article was first published. It is provided for archival purposes but you should consult with your lawyer for the current state of the law
Prepaid purchase cards and gift cards are some of the most popular products in the marketplace today. Their accessibility and ease of use have made them an established retail convenience for many Canadians. Statistics Canada reported that the proportion of large retailers offering gift cards in Canada grew from 53 percent in 2003 to 82 percent in 2005.
For retailers, prepaid purchase cards/gift cards can create and build store loyalty. They bring new consumers into the store and prompt unplanned purchases. A survey done by Savvy Wallet, a California marketing research company, showed that gift card recipients spent an average of $29 over the original card value. Retailers also benefit when a portion of the card balance remains unredeemed or when the card is lost or never redeemed. According to market studies, up to 10 per cent of gift cards are never used.
There are many benefits to consumers. Gift cards relieve the trouble of trying to find the right gift for someone. Recipients can use the gift cards to buy something they never planned on, to supplement buying a bigger item that they want or to buy practical things that you can’t actually give as a gift, like groceries or gas. Gift cards can also be easily mailed to recipients.
In an effort to ensure that consumers get what they pay for, the Saskatchewan Government passed legislation on November 10, 2008, prohibiting expiry dates on all prepaid purchase cards and banning inactivity or dormancy fees that reduce the value of the cards for all cards bought or sold in Saskatchewan.
The Consumer Protection Act defines prepaid purchase cards as an electronic card, written certificate or other voucher device with a monetary value, that is issued or sold in exchange for the future delivery of goods or services. It includes gift cards and gift certificates.
There are a few exceptions to the general rules:
- an expiry date is allowed for prepaid purchase cards that are issued for charitable purposes
- an expiry date is allowed where the consumer has not given anything of value in exchange for the gift card or gift certificate
- retailers can charge a fee for replacing a lost or stolen prepaid purchase card
- retailers can charge a fee for customizing a prepaid purchase card by adding personalized elements.
The Act requires that retailers bring the following information to the consumer’s attention in a clear fashion:
- a description of all restrictions, limitations and conditions that the retailer imposes on the use of the prepaid purchase card including any permitted fee or permitted expiry date
- a description of the way in which the consumer can obtain information respecting the prepaid purchase card, including any remaining balance.
There are substantial penalties if the rules are not followed. An individual who contravenes the provisions of the Act for the first time faces a fine of up to $5,000, imprisonment for a term of no more than a year, or both. For a second or subsequent offence, penalties include a fine of up to $10,000, imprisonment of not more than one year, or both. A corporation is subject to a fine of up to $100,000 for a first offence and up to $500,000 for a second or subsequent offence.
Saskatchewan’s legislation compares to other provinces across Canada. Currently Quebec, Newfoundland, Prince Edward Island and the Northwest Territories are the only provinces without prepaid purchase card legislation.
Businesses are allowed to sell cards with expiry dates on them after November 10, 2008 but they will not be able to enforce the expiry date. It is always best to keep your receipt with your gift card in case you need to prove the purchase date. If you are a business selling gift cards that still bear an expiry date, you should inform your customers that the expiry date on the card does not apply.
The law only applies to cards purchased after November 10, 2008. If you purchased a card or certificate before November 10, 2008, be aware that it could expire.
Finally, consumers face the risk that a retailer will go out of business before the card or certificate is used. There are so many possible consequences that it could justify an article in itself, but it is often the case that the card expires along with the original business. The strength of the business should be a consideration when buying gift cards.