Oireachtas Joint and Select Committees
Tuesday, 2 October 2018
Joint Oireachtas Committee on Jobs, Enterprise and Innovation
Consumer Protection (Amendment) Bill 2017: Discussion
I remind members, visitors and those in the Public Gallery to please ensure their mobile telephones are switched off or in flight mode for the duration of the meeting, as they interfere with broadcasting equipment even when on silent mode. I welcome Deputy Niall Collins, the sponsor of the Bill, to scrutiny of the Consumer Protection (Amendment) Bill 2017.
I draw the attention of witnesses to the fact that by virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the committee. However, if they are directed by the committee to cease giving evidence on a particular matter and they continue to so do, they are entitled thereafter only to a qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and they are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable.
Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the House or an official either by name or in such a way as to make him or her identifiable.
I am delighted that the Consumer Protection (Amendment) Bill 2017 is being discussed by the Joint Committee on Business, Enterprise and Innovation following the successful passage of this Bill on Second Stage in the Dáil last June. The Bill was passed with cross-party support in the Chamber that evening. I will reiterate many of the points I raised on that occasion again today.
This is a pro-consumer initiative and will greatly enhance consumer protections and rights in the unregulated area of the sale of gift vouchers and their terms and conditions and enhance transparency in this regard. This legislative proposal will ensure Irish consumers can select a gift card or voucher at their own discretion and have full access to the terms and conditions of the product they are buying. They will also have the certainty that the product they are buying will last for a certain period of time. Gift cards which are e-money products are subject to regulation and protections under EU electronic money directives, EU anti-money laundering laws and EU payments services directives. That is an important distinction which I wish to make at the outset. However, gift vouchers and gift cards remain mainly unregulated in Ireland, with approximately two thirds of the market completely unregulated according to industry estimates.
The unregulated sector concerns mainly shopping centre cards and single-brand store cards. Furthermore, there is no protection of funds loaded on cards. Retailers can use such funds as normal working capital and if a retailer collapses the funds are lost to consumers. Finally, there is no consumer protection legislation for these unregulated gift cards and vouchers governing expiry dates, mandatory requirements on transparency, security of funds or fees charged. This is very concerning during the busy shopping period when peak shopping takes place. For example, Christmas is one of the busiest times of the year for the sale of gift vouchers. However, consumers receiving the gift vouchers can often be left unawares regarding the terms and conditions that apply. Specifically, the period of time for which vouchers remain valid can vary. As a result, consumers are left shortchanged when they go to redeem them. It is fair to say that some retailers are more flexible than others but currently they have the right to refuse to honour the voucher outside of the defined period.
During the last seven years successive Governments have failed to protect consumers by not enacting consumer protection legislation to regulate gift vouchers. This was acknowledged in the heads of a 2015 Government consumer rights Bill that has remained in limbo since then. The heads of that Bill state “the proposals in [this] Chapter are the first legislative provisions to deal specifically with these products”, that is gift vouchers.
My Bill provides for new provisions to regulate the sale of gift vouchers and the contracts for their supply by amending the Consumer Protection Act 2007. The Bill establishes a definition for gift vouchers. This takes in all types of such products whether they are cards, written certificates or in electronic or other formats. For the first time in Irish consumer law, the Bill proposes that there can be no expiry date on gift vouchers “which is not less than a five year period”. In other words, all gift vouchers would remain valid for five years. This five-year expiry date has been deployed in other jurisdictions to good effect. Moreover, under this Bill an obligation is imposed on the trader to inform the consumer of any fees associated with the sale of the voucher before the consumer is bound by the gift voucher contract. Gift voucher contracts can provide for restrictions on their use. The Bill enhances consumer protections by providing that a consumer must be informed of any restrictions associated with a gift voucher before being bound by any such contract.
I acknowledge the work of other parties in this area and I hope all parties can work together in the Oireachtas to progress this legislation to Committee Stage swiftly as it represents the most advanced proposal currently in the legislative process. Under successive Governments there has been no movement on the 2015 heads of a Bill to regulate gift vouchers, with Ministers citing coming EU legislation which has primacy over domestic legislation as a reason for not prioritising. In November 2017, I raised the issue of the non-movement on this 2015 Bill. Then Minister of State, Deputy Pat Breen said to me in reply:
I have to consider the advisability of bringing forward a legislative proposal to the Oireachtas when a directly related and fully harmonised legislative proposal may be at an advanced stage of the European Union legislative process.
We learned over the summer that the Minister for Business, Enterprise and Innovation, Deputy Heather Humphreys, intends to bring forward another Bill in the area. I note that the Government is now saying that given the slower than expected progress of EU proposals, it has been converted overnight to the cause of regulating gift vouchers. I hope the Government will consider supporting the passage of my Bill, which is at the most advanced legislative stage of any proposal in the field.
I wish to update the committee of something of which it is probably aware. On 18 September I received correspondence form the Ceann Comhairle indicating that he was satisfied that a money message from the Government is required in respect of incidental expenses arising for the Competition and Consumer Protection Commission as a result of the proposed inclusion of gift vouchers in its enforcement remit under the Consumer Protection Act 2007. The Bills Office has requested a money message from the Department of Public Expenditure and Reform and asked that an initial indication be given within three weeks as to whether it will be provided. I urge the Government to grant a money message so that this Bill can proceed to Committee Stage and enable members to have further input into the legislative process. I look forward to bringing this legislation through the Oireachtas as quickly as possible to ensure that consumer rights are protected.
Members may have discussed the correspondence from the Ceann Comhairle. I was sent a copy and I believe it was sent to the committee Chair. It was dated 18 September. It asked for the Department of Public Expenditure to respond on the issue of the money message due to these incidental expenses. It also noted that there is nothing in the Bill requiring a financial resolution or consultation with the European Central Bank, ECB, and the request was only for a money message.
I thank Deputy Collins. As members know, I have worked in retail all my life. I have sold an awful lot of vouchers in my day. This Bill is very timely. We are now facing into the busiest period for any retail, the period before Christmas. There is no doubt about it; consumers need to know when they purchase a voucher from a retailer, online or in person, what the value of the voucher is, the restrictions on its use and the expiry date. These must be stated upfront. As I have said, I have worked for a long time in the retail sector. Where I worked previously, in a family jewellery business, we sold a lot of vouchers.
There were no limits on the vouchers, which was very welcome to consumers. People sometimes receive a voucher as a present for a birthday or Christmas but, because they did not purchase it themselves, they are not aware of the terms and conditions. They might put it away or into their bag or wallet and might not pull it out for 12 or 18 months, when they discover the voucher has gone out of date. That means the person who paid €50, €75 or €100 for the voucher loses their money and the person who sold it is a beneficiary. As Deputy Collins said, there are differences in approach from various retailers, with different rules applying. They are not regulated at the moment but it is timely to regulate them now. A customer's voucher may be out of date by one day in one shop but, in another, a voucher might be valid for three or five years.
In the context of the issue of a money message, can the Deputy explain how an expense might arise? Is it for the enforcement of any regulation that we might bring in?
Yes. The correspondence from the Ceann Comhairle mentioned incidental expenses. The budget of the Competition and Consumer Protection Commission is in the order of €12.8 billion per annum, which is fairly significant. The Bill states that there should be basic transparency. It states that the person who purchases the gift voucher goes into the transaction with their eyes wide open. The person who is the recipient of a gift voucher should know the exact terms and conditions, as well as details of its expiry. Gift vouchers often have very little text on them or any details relating to the expiry date. I imagine we are all on the same page on this.
It is estimated that the spend on gift vouchers per annum is some €350 million, which is a very significant amount of money. Pricewatch, which monitors prices in conjunction with the Consumers' Association of Ireland, estimates that between 15% and 20% of vouchers are never cashed in. Some get lost but in many cases people put them away, not thinking they have expiry dates. People who do not use a voucher are at a huge loss in such circumstances.
This is about bringing certainty, transparency and a bit of definition to what people sign up to when they buy a voucher. There is an important distinction between vouchers and electronic money, which we discussed on Second Stage in the Dáil. Electronic money cards, such as One4all cards which can be used in an array of situations, are properly and appropriately regulated by the EU Communities (Electronic Money) Regulations 2018 and by the anti-money laundering regulations. We are not really concerned with that segment of the market. It accounts for one third of the spend of €350 million to which I referred but we are concerned about the other two thirds.
There are also issues around the presentation of a voucher. One is the issue of whether a person is entitled to receive change if they present a voucher for €100 to buy goods or a service costing €80. In some cases change has been refused when this happens and there have even been cases where the balance on the voucher is cancelled. There have been cases where a person presented two vouchers to purchase a single product or service but they were declined. In others, people present a voucher when a shop is holding a sale but the shop may have a policy not to accept vouchers at such time. Similarly, some pubs or restaurants do not accept vouchers at busy times. All these things need to be transparent in the terms and conditions of a voucher or gift card so that, when the purchaser is buying one, they know exactly what they are signing up to.
If a person has spent €50 on a voucher there should not be a limit on when he or she can spend it. A pub or a shop should not refuse to accept gift vouchers just because it is busy on a Sunday. Retail Ireland and Chambers Ireland are very supportive of a five-year timeline, while Retail Excellence is more supportive of a three-year timeline. Has Deputy Collins given any thought to what happens if a stand-alone, single retailer uses money from vouchers for cash flow?
That is a particular issue if a business closes or changes hands. In the case of the One4all card, the electronic money is held in escrow and is secure but this is not the case with vouchers. There is no such regulation for a single-store branded voucher from a shop, hotel, restaurant or chain store. If any such businesses close or change ownership, the person holding the gift voucher becomes an unsecured creditor, effectively putting them at the end of the line to get their money back. I do not have an answer to the Chairman's question here and now-----
-----but I would take the advice of the Competition and Consumer Protection Commission if it was to offer it.
The Chairman mentioned the representative organisations. In the course of researching the Bill I came across an article which referenced Dermott Jewell, who advocates on behalf of the Consumers Association of Ireland. It stated that, in August 2016 the Consumers' Association of Ireland, frustrated by the lack of progress on the issue, wrote to the leading retail representative bodies, Retail Excellence Ireland and Retail Ireland, asking them to agree to a six-year limit on all vouchers sold by their members.
It said that Irish consumers have for too long been issued with credit notes and vouchers, paid for in hard cash, with expiry dates that in reality devalue their money in the unacceptable, retailer determined three, six or 12 month period of time. Dermott Jewell went on to say that after the period of time the note becomes of no value, a worthless piece of paper, but there is no loss to the retailer who has the money for nothing safely in the bank. He said he was not surprised that both retail groups ignored his correspondence and did not give a response.
A person exchanges his or her money for the gift voucher so as far as the person is concerned the gift voucher is the same as money. If a person loses a €50 note he or she has no recourse, and if the person loses a voucher the majority of retailers feel the person has no recourse either unless, perhaps, they know the person well and have kept a record of it. Did you give any thought to that?
Yes, that arose on Second Stage. It is a valid point. It is not specifically referenced at present but there is no reason that it cannot be included by way of an amendment which would require anybody who is engaged in selling gift cards or vouchers to keep a register. Many of them do not. Again, this is not rocket science. It is achievable. It is not something that is going to send the dial on the money message indicator into the red in terms of it being a charge on the Exchequer.
To be fair, some of them might be small retailers, such as an independent hairdressing salon or a small store, and they might manually write out the gift voucher, whereas in the bigger retailers they would be provided electronically. It would be a good idea to keep a record of them.
Like you, Chairman, I worked in a retail business for 19 years, mainly in the travel industry. This is the quietest time of the year and in November and December we sold nothing but vouchers so I have a keen interest in selling vouchers. People used to return to us in January, February and March, our busiest time, to spend those vouchers. I thank Deputy Collins for bringing the Bill forward. As I indicated in my contribution on Second Stage, we will support it. It is important to regulate this area given how much money is spent on gift vouchers. It can be a source of great frustration when people can no longer spend the money on a card or are penalised by fees if they lost the card or it is missing. It is welcome that there is cross-party support for the Bill. The Social Democrats had previously brought forward a Bill on this topic and I understand the Government is to bring forward its own Bill. Would it not be a better use of our time if the Government worked with the Opposition on Bills when they are already in the legislative system instead of progressing those Bills, scrutinising them and then starting again with a new Government Bill? That is the case with this Bill and with my anti-ticket touting Bill. I make that observation because it appears that we could get things done more quickly if this was the case.
Regarding a matter I raised on Second Stage, I have been in contact with a business that wanted me to raise an issue that will arise for it due to changes in this area. This company sells vouchers for specific described events such as motorised racing experiences, hot air balloon trips and so forth. A monetary value is not specified for these vouchers, which is why they are often an attractive option for gifts. The company has highlighted the effect a five year timeframe could have on its business, as the cost of an event when the voucher is purchased could be very different from the cost five years later. Insurance and fuel costs are constantly jumping, always higher of course, and one can understand the company's concern about that. Will Deputy Collins and the Minister, Deputy Humphreys, consider this when they are progressing their respective Bills to see if a solution can be found for this situation?
On another matter, has Deputy Collins examined where similar legislation has been introduced in Europe or elsewhere and has been successful? Again, I thank him for bringing the Bill forward as it is very important.
The US and Canada introduced an expiry date. We found in our research that it helped to reduce greatly the value of gift vouchers that were unpresented and were just left idle. The percentage shrunk to low single digit figures, which is good. The transparency aspect with regard to the terms and conditions that will attach to a gift card or voucher is important. This point was made to me and it arose at my constituency clinics. We are all constituency public representatives so we come across all sorts of scenarios. Many gift vouchers are purchased for children and minors, be it for birthdays, communions, confirmations and the like, and they are the people who are feeling the brunt of it. They tend to stockpile them for particular reasons and then when they go and present the vouchers it is a huge disappointment to them that the face value of the gift card or voucher has been discounted because a period of time has elapsed. If a child presents a voucher for €100 and it is the practice of the organisation that has issued and sold that voucher to discount it by €10 every month or after six months, the fact that these types of practices are available is not obvious to the purchaser or indeed the recipient of the gift voucher. It is not fair.
I thank Deputy Collins for bringing this Bill forward. I have two questions relating to what he is proposing around transparency. If a particular retail outlet stipulates in its terms and conditions that this reduces by €10 every six months or whatever, is he saying that this is okay or is he saying that the value should just hold and that if it is €100 it remains €100? Second, has he been in discussions with the Minister about his Bill?
We have not sought to be prescriptive in the Bill in terms of the fees and charges or the terms and conditions. It is about making the purchaser of the voucher completely aware that when purchasing the card or voucher he or she knows it is being purchased with set terms and conditions, whatever they may be. We are not getting into prescribing fees or the discounting. The Bill prescribes the five year definitive period of time. It also defines a gift voucher because it is not defined in law at present. However, we are not getting into the detail or telling people what to do. That is a business issue and the marketplace will dictate much of it. If people are shopping around and they know retailer X is offering a €100 voucher with a discount down to €50 or €60 within a defined period of time and retailer Y is offering one that remains at face value of €100, where will they go? The market will decide that.
There was a public consultation in recent weeks. The committee is holding a meeting with the Department's officials after this so members will hear about that. We made a submission to that. We have also discussed it during Question Time in the House and there have been some parliamentary questions.
I congratulate Deputy Collins. It is well worth doing. I note that Senator Bacik brought forward a similar gift voucher Bill in 2009. I believe this is in the interests of the small retailer as well because confidence in the gift voucher means it will continue, unlike if it loses that confidence. Two small restaurants opened near my home two years ago and I decided to buy vouchers from them because I wanted to direct business their way and to help the local small urban village that needed the investment.
It was a good way to support local businesses. What struck me about having a register is its simplicity. The businesses recorded my name and the amount I paid in a book and issued me with a voucher. One of the people to whom I gave the voucher lost it. There was never a question raised about this because it was recorded in the book. For businesses, not just consumers, confidence in gift vouchers is very important. We often encourage the purchase of gift vouchers in urban villages from the small struggling shops to try to shore up the business.
I have two questions. As to the money order, could I suggest that the costings of the Bill be taken from what is currently adjusted as there is an existing consumer protection budget? The cost could come from currently allocated resources and there would therefore be no be need for a money message.
I was going to ask Deputy Billy Kelleher who was beside me the second question. There was a problem with section 55 of the Consumer Protection Act. Does this Bill run foul of the same section 55?
The Senator's comment on Senator Ivana Bacik's Bill reinforces what we are all saying. The thrust of her Bill, this Bill and Deputy Richard Bruton's Bill has been bouncing around the system in here for the bones of ten years. It is high time we dealt with this as we are all on the same page. The Senator asked about section 55 of the Consumer Protection Act 2017. That is something that could be reviewed by the Attorney General's office if the Bill receives a money message and proceeds to Committee Stage to get final clarity. We are proposing that the full consumer protections of 2017 be extended to gift vouchers. We are adding to domestic legislation as opposed to amending the overarching EU directive that is directly applicable in Ireland. If in the opinion of the Attorney General's office it would be best from a legislative perspective to have a standalone piece of legislation, and not amend the 2007 Act, I will be open to this in order to progress the Bill to Committee Stage.
I commend Deputy Collins on this worthwhile Bill which has been on the agenda for a number of years. Unfortunately, all of us have had bad experiences with vouchers at some stage. This committee has always worked very constructively, with a very strong lead from the Chair, on any matters that have come before it.
This is the third matter. We have previously had Deputy Quinlivan's Bill concerning the sale of tickets and the banded hours Bill from Deputy Cullinane. Good legislation has been introduced but rather than progress the legislation, the Government asks us to wait and says it has its own Bill. It reminds me of the kid in the playground who says "that is my ball", and grabs it back. If the general public knew how business is being done in here, they would be a bit gobsmacked. This strikes me as a perfectly good Bill. As the Chair said earlier, no legislation is perfect but we can work with it. The idea that our well-paid civil servants spend an awful lot of time duplicating work that has already been done, good work by Deputy Niall Collins in this case, and by Deputies Quinlivan and Cullinane prior to this, makes absolutely no sense. We just need to call that out.
That is a very fair point.
To summarise, this is a pro-consumer Bill, which is most important. We are currently at a crossroads. I read recently that by 2020, 80% of all clothes will be bought online. We have high streets and towns and villages everywhere that are crying out for footfall. I know we get the footfall at Christmas. As Senator Humphreys has said, if one goes into one's local store and buys a voucher, it is in the knowledge that an item will be purchased in that shop and not online. I am always preaching, as I have a retail background, to shop local, buy local and support local. It is so important. The first step in that direction is to regulate the whole gift voucher practice. As Deputy Niall Collins has pointed out, 65% of all gift vouchers in Ireland are not regulated. It is a free-for-all if we are to be honest. It is high time that we had regulation. I take the Senator's points, because I had the same conversation this morning with the secretariat, that we seem to be spending a lot of time going over similar Bills from Opposition parties and from Government. If we all pulled together, perhaps, we could get one of these Bills over the line, and the consumer would be the winner.
I thank Deputy Collins for coming in here today.
I will make two brief final points. I do not have a monopoly on wisdom and we will have the learned people from the Department to speak after me, who I am sure will give the committee some useful insights on this. Like any piece of legislation it can be amended and improved. This is the first offering and not the complete article.
I wish to also put on the record that the Competition and Consumer Protection Commission has called for guidelines on the use of gift vouchers and gift cards but it has not called for legislation. That has been out there in the ether for a while. It is time we put something more definitive into legislation because it is such a big spend within our economy.
I welcome from the Department of Business, Enterprise and Innovation, Mr. Kieran Grace, principal officer; Mr. Billy Cox, assistant principal officer; and Ms Emma Hanrahan, executive officer, all of whom are attached to the competition and consumer policy section, to the meeting to scrutinise the Consumer Protection (Amendment) Bill 2017. I have already read out the procedures, and the witnesses were in the room at the time, so I believe we can dispense with that.
I ask Mr. Grace to make his presentation to the committee.
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.
Mr. Grace mentioned the consultation period during which questions of things such as parachute jumps which have a particular value were raised. Surely there is a simple business decision which involves putting a simple valuation on that voucher that would change practices but it would not have a major impact on businesses.
I presume Mr. Grace has taken on board that we are not talking about electronic money, as Deputy Niall Collins said. Does Mr. Grace find that the Bill as proposed is unworkable in the context of section 55 of the 2007 Act?
Mr. Kieran Grace:
On experiential vouchers, views were given in the public consultation and are under consideration. Just because a gift voucher has a period of five years does not mean that everyone waits four years and 364 days to do something. Many people use them very quickly. The Senator is correct and we believe some of the problems that may arise in this regard may be overstated.
On the second issue, it is quite clear that the unfair commercial practices directive is a maximum harmonisation measure of the European Union. It was transposed into Irish law by the Consumer Protection Act, and section 55 set out the blacklist in that regard. Therefore, our view, which is backed by legal opinion, is that the Bill as drafted would conflict with that. The issue is not the five-year term, it is the manner in which the Consumer Protection Act is being amended. That is why, when the Minister, Deputy Heather Humphreys, announced her Bill, it was in the context of the unfair contract terms Bill. It is the same end result; we are getting to the same station but we are taking a different train.
It would be very helpful for us to understand it. When one looks at the draft scheme of the Government Bill, as we will call it to differentiate it from Deputy Niall Collins's Bill, the aim is the same. All the Bills that have been proposed seem to mention the five-year term. One might have mentioned a three-year term. There is general consensus that we need regulation of the sector. There is no doubt about it. It would be very useful for us to get that advice or a note summarising the advice if we are not allowed to see the advice. A summary of the advice would help us to understand it better. It would be very helpful. I apologise to Deputy Humphreys for interjecting.
Mr. Bill Cox:
It is well established in the case law of the European Court of Justice what member states can and cannot do in respect of maximum harmonisation directives. It is mainly that body of advice and opinion from the Commission and European Court of Justice that we rely upon. There was also the experience referred to in our note about sections 48 and 49 of the 2007 Act, which we were required not to commence on advice from the then Attorney General which stated they were not compatible with the directive that is given effect to in the Act Deputy Collins's Bill seeks to amend. It is a minor issue in terms of the substance of the provision. It is really just a question of the form in which it is done. It really does not present any major problem at all. It is quite a minor matter.
It would be very helpful to the committee to have information on how we could amend the Bill before us. There has been much work done on it and I would like to see it progress. If we could be given practical examples of amendments that would allow the Bill to progress, it would be helpful.
That would be very helpful. The witnesses have said there is one major drawback. I underlined it. The Department feels that, as drafted, the Consumer Protection (Amendment) Bill 2017 is not suitable. A minor issue still took a page and a half to explain.
My question was along similar lines. I want to tease out something Mr. Grace said. Lots of people use gift vouchers within a short space of time but if they have a gift voucher for a photographer, for example, they might wait until the next year to use it because they might have a holy communion or confirmation in their family. In that case, the gift voucher might be lying in a drawer for a year and a half but for the most part gift vouchers are spent quickly. I have found that if people have a gift voucher for €100 and spent €85 of it, the €15 might never be used. I think one would find that across the board. We all accept that 65% of gift vouchers that are purchased are not regulated. There must be regulation. I understand how some people might think five years is a step too far for some businesses. I do not have a problem with it. I agree with what Senator Humphreys said about whether it was a hotel stay, a hot air balloon or a weekend away. I bought a charity voucher last year for a weekend away and it did not specify; it was for bed and breakfast for two nights with an evening meal bit it did not specify that. I am sure if people had to specify they would be able to do so quite easily.
Can we go back to the money message issue with Deputy Collins's Bill? If the Bill was to proceed and was technically sound and became law, I do not see where a huge cost to the State would arise from the Bill. Would it be from an enforcement point of view? Is that where the cost would come in? That is where I do not really understand the money message in this case. The retailer who is selling the voucher would have to provide the voucher and details. How would that revert back to the State?
Mr. Kieran Grace:
The other issue is there are various competing needs for various enforcement activities and awareness campaigns. Anything like this would displace something that would have to be done if there were no extra resources given. In that sense, if there is additionally of functions, there would have to be additional resources, otherwise something else would have to be suppressed. It is like the water in the bath analogy.
I understand the witnesses cannot comment on the money message and I should not have asked them to but I was just trying to tease out exactly where the costs were. Mr. Cox and Mr. Grace stated there would be awareness and enforcement costs. I do not think those costs would be such that it could prevent a Bill going forward. Some Bills would be way more costly to the State.
I went over the draft scheme of the Minister's Bill. I will refer to a section in it. It was explained earlier that the money for One4All vouchers is secure and held in an escrow account. We will discuss this later. After 12 months there is a cost on the One4All voucher and its value starts to decrease. I think it varies between €1.40 to €3 depending on the amount of the voucher. Mr. Cox and Mr. Grace stated they might look at that. Will they expand on it?
Mr. Bill Cox:
The amount does not vary with the voucher; it varies with the provider. One4All charges €1.45 a month after 12 months. The Retail Excellence Ireland voucher, which is called FromMe2You, charges €1.40 a month after 12 months. In the past some of the single shopping centre cards have charged €3 a month after 12 months but some of them have recently moved to a different model under which the card expires after 12 months and one has the option of renewing it for a further three or six months at a cost of €9.95 or thereabouts. We are assessing to see how many cards apply fees. Interestingly, Aer Lingus has started to apply a fee of €1.45 a month after 12 months. Previously it had a 12-month expiry date. It is part of the Government Bill that the Minister would have power in the future to regulate the fees.
Mr. Bill Cox:
There is regulation of e-money vouchers or e-money gift cards in respect of what is called the redemption fee which applies if one wants one's money back. The money is stored in the electronic money account, which can be done for an electronic money product, and under the electronic money directive a fee can be charged that is reasonable and proportionate.
The directive is silent about other fees. The argument of the electronic money providers is that they do incur substantial costs in safeguarding the money. They must keep 102% of the funds in the segregated account. In the present interest rate environment, they are charged up to 0.5% by the bank for the privilege of keeping their money. They also incur costs under anti-money laundering legislation and normal business costs that they must meet to provide the product. They argue that, if they cannot charge those fees, their product will not be viable. The main purpose of the recent consultation was to get information on the fees and the revenue from them in order to assist the Minister to determine fees in the future.
I thank Mr. Cox for his informative explanation. I have heard people complaining that they thought they had €30 or €40 on a voucher and, when they go to spend it, they discover that is not the case. If the value of the voucher is falling by €1.45 every month, it reduces very quickly. We are all familiar with One4All voucher, especially when different companies and factories use them as Christmas bonuses to avoid tax liability. They have become very popular. I am glad Mr. Cox clarified that and I noticed that will be examined under the Minister's Bill and that is welcome.
Mr. Bill Cox:
The great majority of vouchers are redeemed within 12 months and vouchers that can be used across a wide range of retailers and service providers are more likely to be redeemed than those that can only be used at a single retailer or service provider. Maybe 2% or 3% of vouchers are not redeemed at all and another 2% to 3% are not redeemed in full. It is important not to get the issue out of proportion. Of those electronic money vouchers, 95% probably are redeemed in full within 12 months, or not long after 12 months. There is still an issue. The Department has had the same representations as the Chairman about vouchers being eroded quickly, particularly low value vouchers. If one has a €500 voucher-----
Mr. Kieran Grace:
The Competition and Consumer Protection Commission, CCPC, regularly updates its guidelines on its website, particularly around Christmas time, extolling the virtues of using a voucher as quickly as possible because it is unsecured credit. Most people use them fairly quickly but, if they are not used within a certain period, the chances of a consumer remembering them diminishes and it is almost guaranteed that it will be months and months before they are used, if they ever are. There is a cyclical hump of usage and then very small usage thereafter. That is where the fees issue comes in. After 18 months, a consumer goes to use it and finds it has half the value he or she thought it had.
Can I ask a couple of other questions in response to the recent public consultation? Did many people engage in the public consultation? It was noteworthy that the likes of Retail Ireland, who represent more than 3,000 outlets, and Chambers Ireland, supported the expiry date of five years and Retail Excellence supported three years. That was cohesive and all of those organisations were singing from the same hymn sheet. Did the witnesses get more submissions than they expected for the consultation, or was it what they were expecting?
Mr. Bill Cox:
There were not many submissions from individual retailers and service providers. The submissions came from the representative bodies. The Department would have liked more from small businesses about the problems that a five-year minimum term might have for them but it did not and that is something it will try to pursue.
There were a number of representations from the providers of experience gift vouchers that are not for a specified monetary amount and the Minister for Business, Enterprise and Innovation, Deputy Humphreys, made a point about that. Those providers have a valid concern in that some people prefer to give someone an experience rather than a voucher for a particular amount. The legislation should not necessarily state they cannot do that any longer. It is an issue the Department intends to look at and it will consult with some of the providers of experience gift vouchers.
Forty-four submissions in public consultation is quite low. Some of those were multiples that were representing different organisations. How do public consultations work? Does the Department advertise in newspapers and online? Is that the gist of it?
Mr. Bill Cox:
Forty-four is quite a good response for consultations on consumer law, even though one might think the figure would be higher, given that everyone is a consumer. We do not take advertisements out in the newspapers any longer, partly because not that many people read newspapers, to be perfectly honest, and partly on cost grounds. The Minister publicised it. When the closing date was coming up, she went on Twitter and the Department brought out a press statement encouraging people to get in. A serious effort was made to get the maximum number of contributions.
Mr. Kieran Grace:
The Department has an e-bulletin for business every fortnight and the consultation was mentioned in that. There is a list of people to whom we market directly and their views were solicited. The Department tried to maximise engagement, but people often do not respond until they see the Bill itself.
I apologise for my delay getting here, I had another commitment, so the witnesses might have covered this already. It has come to my attention since we started talking about this Bill that a number of outlets are taking a gift voucher for a certain amount and then refusing to give change. Is there anything in the Department's proposals that covers this, or is it something it is looking at? I see the witnesses nodding, so it is obviously something that has crossed their desks.
Mr. Bill Cox:
It is not in Deputy Collins' Bill, or only insofar as that would constitute a restriction on the use of the voucher and the trader would be required to provide information about it. It is not currently in our Bill, but the Minister is open to considering other issues.
It is wrong to say there is no regulation of gift vouchers at the moment. Gift voucher contracts are subject to general consumer protection legislation and refusing to give change could be held to be an unfair commercial practice under the Consumer Protection Act and not telling people that they would not get change could be a misleading omission under the Consumer Protection Act. It could also be an unfair contract term under the unfair contract terms regulations. The Department is not responsible for enforcing that legislation, but there are information requirements for gift voucher contracts under the regulations that give effect to the consumer rights directive. There is quite a lot of legislation on gift vouchers. It is just not specific to gift vouchers and some of it could address that particular practice.
I am not sure how widespread the practice is. There have been individual instances of it brought to the Department's attention. It is something it will look at, particularly on the information side.
Last year or the year before, we heard much about people who bought gift vouchers for flights for different airlines. That did the rounds on some radio programmes. If a consumer had a voucher for €250 and the flight cost €212, they would never see that €38, or it is unlikely they would see it. It got a lot of traction.
That was one issue that was drawn to my attention.
I thank Mr. Grace, Mr. Cox and Ms Hanrahan for coming here today. It is much appreciated and I thank them for their presentations and for answering all the questions the committee has asked of them. We will now go into private session. Is that agreed?