Gift Card Refund Laws: What Businesses Need to Know

Gift cards have become a staple offering for many UK businesses, providing customers with flexible gifting options and upfront revenue for businesses. However, the key legal aspects you must address when offering gift cards are often more nuanced than you think, in terms of refund laws. This article considers the key points you need to bear in mind regarding refund laws in the UK.

Under UK laws, gift cards often occupy a grey area, as they are not explicitly regulated. Practically speaking, you should ensure that you are including essential terms around refunds on the physical or virtual gift card. 

1. Clear Terms and Conditions

You must provide clear and transparent terms and conditions for your gift cards. This includes information about:

• expiry dates; 
• usage restrictions; 
• refund policies; and 
• any fees associated with the card. 

Failure to provide clear terms could lead to disputes and potential legal issues under UK consumer protection laws. Key considerations include transparent communication of terms and proper handling of online sales, which are subject to a 14-day cooling-off period. By ensuring transparency in your gift card policies, you can avoid regulatory scrutiny and maintain customer trust.

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2. Online and Distance Selling Considerations

Under UK distance selling regulations, consumers who purchase gift cards online or over the phone are entitled to a 14-day cooling-off period. This period begins the day after the gift card is received. It is really important to mention this in your terms and conditions. Otherwise, the 14-day cooling-off period could be extended under UK consumer laws.

The cooling-off period does not apply if the gift card has been used, even partially. You must clearly communicate this in your terms and conditions. It is crucial to note that the cooling-off period only applies to the purchaser of the gift card, not the recipient. Once the gift card has been given to the intended recipient, the original purchaser’s right to cancel typically expires.

In any event, it is crucial that you specify any terms and conditions attached to the gift card. Refunds and policies around this must be stated very clearly to avoid any ambiguity or future dispute.

3. Expiry Dates

While it is legal to set expiry dates on gift cards, you must clearly communicate these to consumers. The expiry date should be prominently displayed on the card and in the terms and conditions. Unlike some other countries, the UK does not have a law specifying minimum validity periods for gift cards. Generally, market standard timeframes are 12-24 months or longer, but this is not a legal requirement. 

4. Other Considerations 

Some further considerations are outlined below: 

• Changes to Terms: You cannot unilaterally change the terms of a gift card after purchase, as under consumer laws, a unilateral change of your terms is likely to be considered unfair. Any changes must be communicated clearly to consumers and should not significantly alter the value or usability of the card.
• Faulty Cards: If a gift card is faulty, you must offer a refund or replacement under UK consumer rights legislation.
• Company Insolvency: If your company goes into administration, gift card holders become unsecured creditors. While not legally required, many administrators try to honour gift cards to maintain goodwill. You should have contingency plans in place for this scenario.

Specific Refund Scenarios

• Unwanted Gift Cards: UK law does not require businesses to offer refunds for unwanted gift cards. However, some companies choose to do so as a gesture of goodwill. If offering this service, you should clearly outline the process and any associated fees.
• Partially Used Cards: There is no legal obligation to refund the remaining balance on a partially used gift card. However, you may consider allowing consumers to use remaining balances on future purchases to maintain customer satisfaction.
• Expired Cards: Once a gift card has expired, you are not legally required to honour it or provide a refund. However, you choose to extend expiry dates or allow grace periods as a customer service measure.
• Lost or Stolen Cards: Businesses typically treat gift cards like cash. This means you would not be responsible for lost or stolen cards. However, if a card is registered and can be proven lost or stolen, you may choose to replace it as a goodwill gesture.

Key Takeaways

When offering gift cards, make sure your terms and conditions are clear and transparent to comply with UK consumer protection laws. Be specific about expiry dates, refund policies and any fees. If you sell gift cards online or over the phone, remember that consumers have a 14-day cooling-off period for unused cards, which you must clearly state. The right to cancel usually ends once the gift card is passed to the recipient. While you are not legally required to refund partially used or expired cards, offering replacements or grace periods can help maintain customer goodwill.

If your business supplies gift cards, our experienced contract lawyers can assist you as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to solicitors to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.

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