Mr. Kieran Grace:

Go raibh maith agat, a Chathaoirligh, and I thank the committee for the invitation to make a presentation on the Consumer Protection (Amendment) Bill 2017.

My comments will deal in turn with the framing of the Bill as an amendment to the Consumer Protection Act 2007; its scope as determined by the definition of gift voucher in section 1; the proposed five-year minimum term for gift voucher contracts provided for in the first part of section 2; and the proposed information provisions in the second part of section 2. The comments will draw, among other things, on stakeholder submissions on the gift voucher provisions of the scheme of the Consumer Rights Bill 2015, as well as on responses to the recent consultation on the Unfair Contract Terms (Gift Vouchers) Bill 2018, the scheme of which was approved by Government on 12 June 2018.

Deputy Collins's Bill proposes to make a term of less than five years for gift vouchers a prohibited commercial practice under section 55 of the Consumer Protection Act 2007. That Act gives effect to the Unfair Commercial Practices Directive, UCPD, and section 55 transposes the blacklist of prohibited commercial practices in Annex I of the directive. While there are attractions to proceeding in this way, there is one major drawback. As the UCPD is a maximum harmonisation instrument, providing for the regulation of gift voucher expiry dates as part of a prohibition on commercial practices runs the risk of legal challenge on the grounds of incompatibility with EU law.

This is not an abstract risk. Sections 47 and 48 of the Consumer Protection Act, which deal with payment surcharges, were not commenced following advice from the then Attorney General that their provisions were incompatible with the maximum harmonisation status of the unfair commercial practices directive, UCPD. For this reason, the gift voucher provisions in the schemes of the 2015 and 2018 Bills do not take the form of an addition to the commercial practices prohibited under the Consumer Protection Act, but are framed instead in terms of a prohibition on contract terms which provide for a duration of less than five years for gift vouchers. As the directive on unfair terms in consumer contracts is a minimum harmonisation instrument, a provision framed in this way does not run a similar risk of legal challenge.

The definition of "gift voucher" in section 1 of Deputy Niall Collins' Bill, which is similar to that in the scheme of the 2015 legislation, states that it means a voucher in any form, including a card, an electronic certificate or a written certificate, supplied by a trader which the consumer is entitled to apply towards the purchase of goods, digital content or services covered by the voucher. There is a need to examine whether the broad nature of this definition could potentially bring some products within its scope that would not normally be regarded as gift vouchers or in respect of which a five-year minimum term might not necessarily be appropriate. Among the products which the definition might be held to encompass are vouchers issued under loyalty schemes operated by retailers, Groupon-type vouchers that give access to goods or services at a discounted price for a limited time period as well as a range of prepaid instruments, including transport cards such as Leap cards, the pay-as-you-go cards issued by electricity and gas suppliers, petrol and diesel cards, and phone cards. It has also been suggested however that the definition of gift voucher should be broadened to include certain products that would likely fall outside its scope, in particular postal orders, credit notes and gift cheques.

As drafted, the Consumer Protection (Amendment) Bill would apply to all gift vouchers within the meaning of what it defines as gift vouchers, including gift vouchers such as the One4all and FromMe2You gift cards that are regulated under the regulations that give effect to the electronic money and payment services directives. In the speech moving his Bill’s second reading on 21 June, Deputy Niall Collins stated that electronic money products operated in a highly regulated environment and that his Bill sought to provide consumer protection in the two-thirds of the market which was highly unregulated. It was not clear whether the Deputy favours excluding gift vouchers that come within the scope of the electronic money and payment services directives from the scope of the Bill but his intervention today has been a helpful clarification. A number of respondents to the recent consultation argued strongly for the exclusion of electronic money gift vouchers from the proposed Government legislation on the ground that their inclusion would involve a double regulation of these products that could lead to confusion as well as possible legal conflicts. The legal advice obtained by the Department is that the provisions of the proposed Government Bill on expiry dates and on the regulation of gift voucher fees are not in conflict with the provisions of relevant EU directives, in particular the electronic money directive.

I now turn to expiry date provision. Section 2 provides that a trader shall not include a term in a gift voucher contract which provides for an expiry date of less than five years from the date of sale of the voucher. The proposed Government Bill includes a similar provision, as does the Private Members’ Bill introduced by Deputies Catherine Murphy and Shortall, the Consumer Rights (Gift Vouchers) Bill 2017. Expiry dates for gift vouchers vary from six months to ten years, with the majority being valid for one to two years. In the retail sector, expiry dates for vouchers issued by large retailers are typically for two years from either the date of purchase or of last use. In the travel and hospitality sectors, an expiry date of one year is common. In its response to the recent public consultation, Retail Ireland which represents retailers with over 3,000 outlets throughout Ireland stated that it would not oppose the proposed five year minimum term for gift voucher contracts. Chambers Ireland, which represents 43 affiliated chambers throughout the Republic, stated that five years was a reasonable minimum term for gift vouchers. Retail Excellence, which represents over 1,800 retailers, favoured a minimum expiry date of three years for gift vouchers not regulated by the electronic money directive, while the Consumers’ Association favours a minimum term of six years.

Opposition to the proposed expiry date provision was expressed mainly by gift voucher issuers and service providers whose business model depends on the revenues obtained from vouchers not redeemed in full or part before their 12-month expiry date. These are mainly vouchers usable in a single shopping centre, the processing and other services relating to which are provided by third parties. The businesses involved in the supply of these cards maintain that a five year minimum term for gift vouchers would make it unviable to provide this type of gift card. While a minimum five-year term for gift vouchers would also impact on small retailers and service providers that currently issue vouchers with a one or two year expiry date, this type of voucher is still often provided in paper form and does not generally involve significant costs for the trader.

During the Second Stage debate, Deputy Quinlivan drew attention to vouchers which are not for a specified monetary amount but instead entitle the holder to avail of a specified experience or activity such as a hotel stay, restaurant meal, a beauty treatment or an outdoor activity. A number of businesses which offer this type of voucher expressed concern in responses to the recent consultation about the possible adverse effects of a five year term for gift vouchers. In particular, they argued that the cost to the business of a voucher issued in 2018 for an activity or experience availed of in 2023 could have risen substantially in the interim due to increases in insurance, energy or other costs. Some of this concern may be overstated in that the introduction of a five year expiry date will not mean that large numbers of voucher holders will wait until year five to redeem their vouchers. Business costs may also be stable or even fall over a five-year period, however the implications of a minimum five-year term for this particular type of voucher merits further consideration.

Section 2 further provides that, before consumers are bound by a gift voucher contract, the trader must ensure that they are informed of any fees charged for the voucher and of any restrictions on its use. While these are clearly worthwhile provisions, their scope needs further consideration. Electronic money gift vouchers are subject to wide-ranging information requirements under the regulations that give effect to the electronic money and payment services directives. Gift voucher contracts that do not constitute financial services contracts such as the paper vouchers issued by many small retailers and service providers are subject to the information requirements of the regulations that give effect to the consumer rights directive. There is an information gap, however, in respect of gift vouchers and cards that are not electronic money products but which are outside the scope of the consumer rights directive by virtue of being financial services contracts.

We are happy to answer any questions the committee may have on this or any other points raised.