Gift card exemption riles critics

Last Updated: Thursday, December 6, 2007 | 8:16 AM ET

The Canadian Press

Ontario bragged about becoming the first province to outlaw gift cards with expiry dates or penalty fees, but left the public in the dark about a major loophole that could cost shoppers during the Christmas season, opposition critics and consumer groups said Wednesday.

Ontario's newly updated Consumer Protection Act states that gift cards cannot expire, cannot be sold with a transaction fee and cannot penalize shoppers for not spending their credit immediately.

'You've got to wonder if  these exemptions are just another case of industry lobbyists overriding the interests of consumers.'—Bruce Cran, Consumers' Association of Canada

While the new rules took effect on Oct. 1, few took notice that gift cards sold by shopping malls are still exempt and will be for several more months.

Minister of Government and Consumer Services Ted McMeekin acknowledged Wednesday the exemption is a problem, given that about 40 per cent of Ontario consumers are expected to get a gift card this Christmas. About $1.8 billion is spent annually on the cards across the country.

A temporary exemption was granted to shopping malls after it was argued they have a different business plan that requires third-party administration of their gift cards.

The government agreed to have an outside accounting firm determine if it would be fair to apply the same rules to individual retailers and malls, and a report is due sometime in January, McMeekin said.

But the government is committed to getting rid of the exemption as soon as it can, added the minister, who said he too got a couple of gift cards last Christmas.

"There are some potential pitfalls, if people view them that way, to purchasing a mall card," he said. "We'll be moving to have the mall cards compliant with the existing legislation. We just have to find the best way to in fact do that."

It's estimated that about 15 per cent of the gift cards sold in the province come from shopping malls and are still exempt from the rules.

Cadillac Fairview charges a $1.50 processing fee for its gift cards, which can be used at more than 4,000 stores in 29 malls across the country. The cards are also subject to a monthly $2 maintenance fee if a balance remains after 15 months. The cards are only valid for three years, after which they must be reinstated by customer service.

Bruce Cran of the Consumers' Association of Canada said gift cards should be avoided at all costs because too often consumers are just giving money to retailers and getting nothing in return.

He estimates that about one in four gift cards goes unredeemed, and "they're a very poor proposition for consumers."

"In the event that you can't give a gift, give cash, that's what you should do," Cran said, adding there's an additional risk of a store going bankrupt before a card is used.

He also questioned why malls got the exemption in the first place.

"You've got to wonder if  these exemptions are just another case of industry lobbyists overriding the interests of consumers," he said.

"There's absolutely no justification for that at all."

Most unaware of exemption

Opposition leader Bob Runciman said even he was unaware of the exemption and called on the government to let the public in on the secret.

"I think the government has a responsibility here to do some significant advertising, immediately, to make sure that consumers are aware of the implications of where they purchase these things," he said.

"Here we are into the holiday season and people are spending significant monies in terms of buying these gift cards, and perhaps many of them operating under the assumption that they're protected."

It is still legal for retailers and malls to charge fees for customizing a gift card or for providing a replacement card for one that was stolen or lost.

Corporations can face fines of up to $250,000 for breaking the terms of the act.

Manitoba followed Ontario's lead in banning expiry dates on gift cards and also allows shopping malls to charge maintenance fees.

Opposition parties have lobbied for similar legislative amendments in Nova Scotia and British Columbia but no changes have yet been made.