Do you sell gift cards, vouchers or certificates on your website or through your business? You might be surprised to know that if you don’t meet the Australian Securities and Investments Commission (ASIC) exemptions, you might need a financial services licence to do so.
Gift certificates have become an increasingly popular product for Australian consumers. But many businesses offering them do not realise that gift cards, vouchers and certificates (all ‘gift certificates’) are generally considered ‘non-cash payment facilities’ and are regulated by ASIC. For example, if you provide a means for a customer to make a payment for goods or services using payments other than Australian or foreign currency, this would be caught by the legislation and you would have to have a licence.
Many businesses seem to offer gift certificates, so how do you avoid triggering licensing requirements?
Due to concerns regarding the number of insolvencies of small businesses and increased consumer complaints around sales practices for gift certificates, the consumer and financial services laws now dictate very specific exemption requirements for the sale of gift certificates to avoid the licensing requirements.
You can meet the exemption requirements for gift certificates if you follow these guidelines:
1. Gift certificates cannot be ‘reloaded’
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This means you cannot offer gift certificates which enable customers to add value or increase the value of their certificate amount otherwise it may trigger credit facility law, which requires credit licensing.
2. Gift certificates cannot be redeemed for cash
This means you cannot offer certificates which permit customers to use the gift certificate to purchase goods and receive the remaining balance in a cash payment.
3. Consumers must be made aware of any ‘critical terms’
4. Set a ‘reasonable’ expiry date
Any expiry of less than 12 months may not be seen as reasonable in some cases.
5. Marketed as a ‘gift’ product for multiple use
Providing gift certificates as a means of payment for goods is essentially providing a ‘non cash’ payment facility. This means businesses must market them as ‘gift’ products and not, for example, as a cash ‘alternative’. The certificate must also permit more than one purchase or permit multiple uses until the monetary amount is used or the expiry date met.
Gift certificates are a great way to attract new customers and increase brand awareness for your business, as well as a method to improve your sales. Don’t pass up the opportunity for your business – the market for gift certificates is growing.