Simon looking earnest in Preveza, Greece
Simon Shields, LLB

Advising Self-Representing
Ontario Litigants
Since 2005

tenant / small claims / welfare (ontario works) / odsp / human rights / employment / consumer /
collection agencies / criminal injuries compensation / sppa (admin law)
/ line fences / animal cruelty / dogs & cats / wild animal law (all Canada) / war / conditions of guide use

home / about / client testimonials / areas of practice / about self-representation

Your
Self-Representation
Service Options

Simon Shields, LLB



























CONSUMER LAW

Sector-Specific Consumer Law
(01 July 2013)

Gift Card Agreements
(Gift Certificates)

  1. Overview
    (a) 'Gift Cards' Defined
    (b) Gift Cards are Necessarily Future Performance Agreements
  2. Content and Disclosure of Gift Card Agreements
  3. Expiry Dates Not Binding
  4. Allowed and Prohibited charges
    (a) Overview
    (b) 'Regular' Gift Cards
    (c) 'Open-Loop' Gift Cards
    (d) Illegal Charge Remedies
  5. Remedies
    (a) Overview
    (b) General CPA Civil Remedies
    . Overview
    . Rescission
    . Restitution
    . Right of Civil Action
    . Special Credit Card Remedies
    . Common Law Right of Action Preserved
    (c) Sector-Specific Remedies
    (d) Unfair Practices
  6. Exemptions
    (a) Exemptions by Type
    (b) Exemptions by Rules
------------------------------

CAUTION

This chapter involves law from the Ontario Consumer Protection Act (CPA). Anyone considering using the CPA should first carefully sort out which of its rules apply to their situation. DO NOT ASSUME THAT BECAUSE YOU FOUND THE CHAPTER DEALING WITH THE RELEVANT ECONOMIC SECTOR THAT YOU HAVE ALL THE RIGHT RULES. The steps to do this properly are explained at this link:

Identifying Which CPA Rules Apply to Your Situation


1. Overview

(a) 'Gift Cards' Defined

Gift cards, commonly known as 'gift certificates' are nothing more than what have been for years called 'vouchers'. They operate as proof to a retailer that prepayment in a fixed amount has been made to them.

Gift cards can either be designated to a specific holder by name, in which case only that holder can redeem them - or transferrable and simply redeemable by the holder (or 'bearer'), whoever that is. Typically they are transferrable as suppliers want to encourage consumers to purchase many and distribute them freely to family and friends.

Gift cards are sometimes redeemable with retailers other than those from which they were purchased, in which case the retailer and the issuer will engage in collateral financial transfers amongst themselves to balance out accounts.

The following key definitions are required to understand how gift cards are regulated under the CPA [CP Reg 23]:
  • "Gift Card"

    "gift card" means a voucher in any form, including 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;

  • "Gift Card Agreement"

    "gift card agreement" means a future performance agreement under which the supplier issues a gift card to the consumer and in respect of which the consumer makes payment in full when entering into the agreement.
(b) Gift Cards are Necessarily Future Performance Agreements

Gift cards are, both by legal definition (above) and by nature, agreements where performance (by the delivery of goods or services) is deferred into the future. As such all gift cards are also 'future performance agreements' as those agreements are governed by the rules set out in Part C, Ch.3, s.2 ["Forms of Consumer Agreements: Future Performance Agreements"].

As gift cards both heavily rely on the 'future performance agreement' rules, and have some express exemptions from them, readers dealing with a gift card situation should review that section as well as this chapter.


2. Content and Disclosure of Gift Card Agreements

Gift card agreements must be in writing, must be delivered to the consumer and must disclose the following information [CPA 22; CP Reg 25.5]:
  • Fees

    The fees that the supplier may charge under s.4(c) below re open-loop gift cards.

  • Restrictive Terms

    All restrictions, limitations and conditions that the supplier imposes on the use of the gift card.
General CPA requirements for disclosure are explained at this link:

General Disclosure Requirements


3. Expiry Dates Not Binding

It is typical that gift cards and gift card agreements provide for an expiry date after which the gift card is not redeemable.

Inclusion of an expiry date under CPA law is prohibited. Further, if one is included with or on a gift card then they are ineffective in law, and the gift card shall be effective as if it has no expiry date [CP Reg 25.3].


4. Allowed and Prohibited charges

(a) Overview

This section addresses what 'extra' charges (ie. over and above the redemption value) are allowed and what are prohibited respecting gift cards.

Preliminary to this explanation is the distinction between 'regular' and 'open loop' gift cards. A 'regular' gift card is redeemable only by the supplier it was purchased from (and its branches or affiliates). On the other hand is an 'open-loop gift card', which has a broader redeemability [CP Reg 23]:
"open loop gift card agreement" means a gift card agreement that entitles the holder of a gift card to apply it towards purchasing goods or services from multiple unaffiliated
sellers.
(b) 'Regular' Gift Cards

As noted, a 'regular' gift card is only redeemable within the retail chain of the supplier that sold it (ie. the location that sold it and other locations of the same chain).

With the following two exceptions, no extra charges may be made with respect to a 'regular' gift card (ie. no amounts above the redemption value of the card) [CP Reg 25.4(1)]:
  • Replacement Fee

    A charge for issuing a replacement gift card when the prior is lost or stolen; and

  • Customization Fee

    A charge to 'customize' the card (eg. add a personal message, etc).
(c) 'Open-Loop' Gift Cards

A supplier may charge an issuance fee for an 'open-loop' gift card of no more than $1.50.

With the following three exceptions, no extra charges may be made with respect to 'open loop' gift cards (ie. no amounts above the redemption value of the card) [CP Reg 25.4(2)]:
  • Replacement Fee

    A charge for issuing a replacement gift card when the prior is lost or stolen;

  • Customizing Fee

    A charge to 'customize' the card (eg. add a personal message, etc); and

  • Dormancy Fee

    A 'dormancy fee' may be charged against the holder (who can be but is not necessarily the purchaser) of the gift card if it complies with the following conditions and requirements:

    - Time Limits

    It may not be charged until either:

    Fifteen months have elapsed from the end of the month in which it was purchased, unless the holder has requested an extension in the 15th month; or

    Eighteen months have elapsed from the end of the month in which it was purchased, where the holder has requested an extension as above.

    - Fee

    The fee may not exceed $2.50 per month.

    - Disclosure

    The card must have a notice on the front in 10 point font indicating that there is fee information on the back of the card.

    The card has a notice on the back of the card setting out, clearly and prominently, the 'time limit' and 'fee' information listed above. By that means or any other, this information must be disclosed to the consumer at the time that they enter into the goft card agreement.

    General requirements for CPA disclosure are explained at this link:

    General Disclosure Requirements
(d) Illegal Charge Remedies

If the consumer (who bought the card) or the holder of an 'open-loop' gift card is charged an illegal charge by either the card supplier of the goods or services seller, then they have the right within one year after the charge to demand it be refunded by the supplier. The supplier has 15 days to make the refund [CP Reg 25.4(5)].

Consumer-issued demand (aka 'notice') procedures are discussed in Part C, Ch.7, s.7: "CPA Civil Remedies: Consumer-Issued Notice Procedures".

While - technically - recovery of illegal charges that are not refunded is available by way of the civil courts it is unlikely that most cases would warrant use of that procedure for the small amounts typically involved. See s.5 following.


5. Remedies

(a) Overview

In addition to the common law law remedies of tort, contract and restitution [discussed in Part A], CPA civil court remedies fall into three categories: 'general', 'sector-specific' (ie. those specific to the 'gift card' sector), and 'unfair practices'.

Non-compliance with any of the general consumer rights [see Part C, Ch.5: "General Consumer Rights"] or with most of the sector-specific rights set out in this chapter can usually be addressed using the general remedies explained in Ch.7 ["CPA General Civil Remedies"]. These are summarized in (b) below.

However some sector-specific rights have their own remedial procedures [discussed in 4(d) above].

Any 'unfair practice' provisions (which deal primarily with 'false, misleading or deceptive' and unconscionable representations) which may have specific relevance to gift cards are set out in (d) below.

As for non-civil court remedies, the CPA provides for a range of administrative Orders [see Part C, Ch.8: "Administrative Enforcement"] and regulatory prosecutions [see Part C, Ch.9: Prosecutions], neither of which are aggressively pursued by the Ministry of Consumer Services or the Director of the Consumer Protection Branch.

(b) General CPA Civil Remedies

. Overview

This is a summary of the general civil remedies available to consumers under the CPA. The full version of this discussion is at Part C, Ch.7: "General Civil Remedies".

These remedial provisions apply to violations of general CPA consumer rights such as warranties, rules about estimates and illegal charges, prohibitions against negative-option contract formation [see Part C, Ch.5: "General Consumer Rights"] - and as well to non-compliance with any sector-specific rights.

. Rescission

Typically, supplier (here 'repairer') non-compliance with any CPA right allows the consumer to cancel the consumer agreement at their election, on the delivery of a Notice of Cancellation to the supplier. Consumer-issued notice procedures are discussed in Part C, Ch.7, s.7: "CPA Civil Remedies: Consumer-Issued Notice Procedures".

However the form of cancellation (properly: 'rescission') used in the CPA does not just end the consumer's duties under the consumer agreement from the date of cancellation and then forward into the future. Rather the cancellation or rescission is 'ab initio' ('from the beginning' of the consumer agreement).

. Restitution

This form of 'ab initio' cancellation then necessitates that both parties, consumer and supplier alike, engage in post-cancellation restitution to each other respecting all that has passed between them since the consumer agreement commenced. Typically this involves the return of goods by the consumer and the return of monies paid by the supplier. In the case of past services performed, or of perishable goods, typically a value compensation provision is imposed on the consumer.

Consumer restitution duties are sometimes complex, so readers should be sure to review carefully both sections 5 and 6 in Part C, Ch.7 "General Civil Remedies".

From the point that Notice of Cancellation is delivered, both parties are under specific timelines to complete their specific restitution duties.

. Right of Civil Action

Failure of a party to fulfil their restitution duties in the time required then automatically triggers a right of civil action in the aggrieved parties (the original Notice of Cancellation doubling as a de facto 'demand' notice). Practically most such claims will be suited to the Small Claims Court with its newly-raised $25,000 monetary jurisdiction, and parallel jurisdiction over the return of chattel property to the same dollar value.

Civil action is also a possibility in some cases where the consumer has not rescinded the consumer agreement fully, for example with the case of illegal charges. In that case there is still a 'Notice' requirement, but after the failure of the supplier to refund the monies the consumer can sue.

. Special Credit Card Remedies

Further, where consumer payments which are now subject to restitution were originally made by credit card, the consumer has a 'back up' right to demand, and then proceed in court, against the credit card issuer should the supplier remain in default of their restitution duties.

. Common Law Right of Action Preserved

The CPA rights of action do not prohibit use of common law remedies in tort, contract and restitution and claims may (and when called for, should) be advanced both under the CPA and common law causes of action.

(c) Sector-Specific Remedies

Remedies specific to gift cards (demands to return illegal charges) are discussed in s.4(d) above.

(d) Unfair Practices

'Unfair practices' are discussed at length in Part C, Ch.6. They primarily address 'false, misleading or deceptive' and unconscionable representations.

Specific 'unfair practices' which may relate to gift cards include:
  • False or Misleading Representation Re Sponsorship or Affiliation of Supplier

    "A representation that the person who is to supply the goods or services has sponsorship, approval, status, affiliation or connection the person does not have."

  • Deceptive or Negligent Representation Re Availability of Goods or Services

    "A representation that the goods or services or any part of them are available or can be delivered or performed when the person making the representation knows or ought to know they are not available or cannot be delivered or performed'"

    This addresses situations where people try to sell goods or services that are not available in order to get a sale now, and then come up with delaying excuses later. In light of the next-following example, this one must refer to the COMPLETE unavailability (that even waiting won't fix) of the goods or services.

  • False or Misleading Representation Re Timing of Availability

    "A representation that the goods or services or any part of them will be available or can be delivered or performed by a specified time when the person making the representation knows or ought to know they will not be available or cannot be delivered or performed by the specified time."

6. Exemptions

(a) Exemptions by Type

The following types of gift cards (and gift card agreements) are exempt from the general 'gift card' rules set out in this chapter [CP Reg 25.1]:
  • Charities

    Gift cards issued for charitable purposes.

  • Single Good or Services Coverage

    A gift card that covers only one specific good or service.

    This is meant to cover services (such as a free massage), an entitlement to a specific good (a book) or other one-time services or goods purchases. Typically such gift cards will not be assigned a specific dollar redemption value, just that they are redeemable for the specific service or good.
(b) Exemptions by Rules

Gift card agreements that are otherwise governed by the CPA are nonetheless exempt from the following CPA rules [CP Reg 25.1]. Most of these exceptions, while structured as exceptions, have the effect of expanding consumer rights.
  • Minimum Value Threshold for Future Performance Agreements Eliminated

    Normally [and as is explained in Part C, Ch.3, s.2: "Forms of Consumer Agreements: Future Performance Agreements"], future performance agreements where the 'total potential payment obligation, excluding the cost of borrowing' is less than $50 are exempt from the normal future performance agreement rules set out in that section.

    However, 'gift card agreements' (all of which are future performance agreements as well) are NOT subject to that threshold so that even if they are of low value the future performance agreement rules apply to them.

  • Late Delivery of Goods or Commencement of Services

    Normally, where a future performance agreement provides a specific date for delivery of goods or commencement of services, and the supplier is more than 30 days late on that date, the consumer may cancel the consumer agreement. Where no specific date is set out in the consumer agreement the 30 days starts to count from the date that the agreement is executed.

    That right and consequent follow-up rules are explained in Part C, Ch.3, s.2(e): ["Forms of Consumer Agreements: Future Performance Agreements: Consumer Cancellation Right Where Late Performance"].

    However (and logically), 'gift card agreements' are not subject to that rule, as the time of consumption of the goods and services is at the will of the holder of the gift card.

  • Return or Repossession of Goods to Supplier After Cancellation

    The normal rule on cancellation of a consumer agreement is that the consumer must return, or allow the re-possession of, goods received back to the supplier [see Part C. Ch.7: CPA General Civil Remedies, ss.5 and 6].

    However, that rule does not apply to the goods obtained under gift certificates, which are normally held by third party (and prior) holders of the gift certificate.

Lawyer License #37308N / Website © Simon Shields 2005-2017