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Dáil Éireann debate -
Thursday, 21 Jun 2018

Vol. 970 No. 6

Consumer Protection (Amendment) Bill 2017: Second Stage [Private Members]

I move: "That the Bill be now read a Second time."

I am very pleased that the Consumer Protection (Amendment) Bill 2017 is being discussed today on Second Stage under Private Members' business. This Bill 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. It is another pro-consumer initiative on which my party has been campaigning. This approach to bringing forward legislative proposals will ensure that 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.

Gift cards which are e-money products are subject to regulation and protection under the EU electronic money directive, the EU anti-money laundering laws and the payments services directives. However, other gift vouchers and cards remain unregulated in the main in Ireland with approximately two thirds of the market being completely unregulated. The unregulated sector concerns mainly shopping centre cards and single brand store cards. Furthermore, there is no protection of the funds loaded onto these cards. Retailers 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 vouchers and cards in respect of expiry dates, mandatory requirements on transparency, security of funds or indeed the fees charged. This is a matter of concern during a peak shopping period. Christmas is one of the busiest times of year for the sale of gift vouchers, however, consumers receiving the gift vouchers can often be left unaware of the terms and conditions that apply to them, specifically, the period during which vouchers remain valid can vary. As a result consumers are often left shortchanged when they go to redeem them. Some retailers are more flexible than others but they have the right to refuse to honour the voucher outside the defined period.

Over the past seven years successive Fine Gael-led Governments have failed to protect consumers by not acting on consumer protection legislation to regulate gift vouchers. This was acknowledged in the heads of a 2015 consumer rights Bill that has remained in limbo. They stated that the proposals in the chapter were the first legislative provisions to deal specifically with these products, gift vouchers. My Bill makes new provisions in regulating the sale of gift vouchers and the contracts for their supply by amending the Consumer Protection Act 2007. The Bill establishes a definition of gift vouchers which takes in all types of product, be they electronic, card, written, certificate or other. For the first time in Irish consumer law the Bill proposes that there be no expiry date on gift vouchers which is "not less than a period of five years". In other words, all gift vouchers would remain valid for five years and the five-year expiry date has been deployed in other jurisdictions to good effect. Under this Bill an obligation is imposed on a 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 in their use.

The Bill will enhance consumer protections by providing that a consumer must be informed of any restriction associated with a gift voucher before being bound by any such contract.

Fianna Fáil is the first political party to move a Bill in this area on Second Stage and we encourage others who have published similar Bills to support the passage of our Bill in order to enable it to proceed to Committee Stage as quickly as possible when further scrutiny can take place. I acknowledge the work of the Social Democrats in this area and hope all parties in the Oireachtas can work together to progress the legislation on Committee Stage.

Successive Fine Gael-led Governments have sat on a 2015 Bill to regulate gift vouchers, citing EU legislation that is coming down the road that will have primacy over domestic legislation as a reason for not prioritising it. Last November when I raised the issue of the lack of movement on that Bill, the Minister of State, Deputy Pat Breen, stated: "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." In other words, the Government was not going to progress the Bill in the Dáil for the reasons stated at the time. Clearly, it was another example of old stroke politics, given that Fine Gael, through the Minister, Deputy Heather Humphreys, did a complete U-turn and brought forward its own Bill only a few days after the Fianna Fáil Bill had been selected for discussion on Second Stage in Private Members' time. I note that the Government is now using the line, "given the slower than expected progress of EU proposals". It has been converted overnight to the cause of regulating gift vouchers. It is a cynical, if not gigantic, U-turn which showcases once more the fact that the Government does not care about the delivery of policy but rather prefers to copy the lead Opposition party in bringing forward progressive consumer protection measures after being asleep at the wheel on the issue for the past few years. Since the Government has been converted on the issue, I take it that it will now support the passage of our Bill and allow it to proceed to the next Stage. I urge it not to drag its heels in dealing with this progressive consumer protection legislation and to do the honourable thing. I look forward to bringing the legislation through the Oireachtas as quickly as possible to ensure consumer rights will be protected and that there will be no nasty shocks or surprises for consumers or members of the public.

I refer to a statement issued by an organisation known as the Prepaid International Association. For the benefit of the House and those interested in the passage of this legislation, the Prepaid International Association is a global not-for-profit trade organisation that was established in 2007 to represent organisations involved in the supply of prepaid financial services and products. It acts as the principal point of liaison between the industry and Government agencies, regulators and consumer bodies. With respect to this Bill, its chairperson, Mr. Craig James, stated:

We welcome any moves by legislators that strengthen consumer confidence in prepaid products, including gift cards. The measures proposed address some of the key consumer concerns in this area and bring regulation to bear on the currently unregulated sector of the market such as store branded gift cards.

He went on to say the organisations the Prepaid International Association represented issued their products under the European Union e-money directive, which I referenced. I acknowledge that the regulated sector conducts its business in a highly regulated environment under the European Union e-money directive. Mr. James went on to say the directive went further than the proposed legislation - which is true - in that it offered security for consumer funds for products to operate in a fair and open manner through adherence to the treating customers fairly guidelines. As the sponsor of the Bill, I indicate that there is European Union legislation under which e-money product services operate in a highly regulated environment. The legislation I have outlined seeks to provide consumer protection in the two thirds of the market in this country which is highly unregulated.

I am happy to contribute to the debate on this Bill and commend Deputy Niall Collins for bringing it before the House. It is progressive legislation. Although it is not the subject of this debate, I also commend Deputies Catherine Murphy and Róisín Shortall for introducing their Private Members' Bill, the Consumer Rights (Gift Vouchers) Bill 2017.

The main provision of the Bill before the House is a ban on expiry dates of less than five years in gift voucher contracts. The Bill also contains provisions aimed at ensuring consumers will be informed of fees for, or restrictions on the use of, gift vouchers.

Surveys undertaken by the Competition and Consumer Protection Commission have found that half or more of consumers purchase gift vouchers. Many employers also purchase gift vouchers to reward employees. The Bill proposed by Deputy Niall Collins is, therefore, of interest and importance to a very large number of consumers and businesses. Its provision for a minimum term of five years addresses a key aspect of gift voucher contracts. Expiry dates on gift vouchers vary widely from six months to ten years, with the majority being valid for one to two years. In the retail sector expiry dates are typically two years from either the date of purchase or last use. In the travel and hospitality sectors an expiry date of just one year is extremely common.

Research undertaken for the then National Consumer Agency in 2013 found that almost half of those surveyed had reported that they had had a gift voucher that had gone unused. In many cases - I am sure this applies to Deputies in the House also - people had found that they were unable to use a gift voucher because it had expired before they went to use it. This is a situation about which something can and should be done and one which is addressed by Deputy Niall Collins's Bill. Clearly it is wrong that, after an unreasonably short time, consumers should be deprived of the benefit of something for which they, or someone close to them, has paid.

The then Minister for Jobs, Enterprise and Innovation, Deputy Richard Bruton, proposed in 2015 that expiry dates in gift voucher contracts be prohibited. This proposal formed part of the scheme of a comprehensive, consolidated consumer rights Bill. Owing to the publication of EU legislative proposals later that year which overlapped with two of the four main Parts of the Bill, its subsequent progress has been delayed, but I am glad to be able to say the relevant EU proposals are expected to be adopted in 2019 and that the Government intends to reactivate the Bill at the earliest possible date. In the meantime, the Minister has decided that legislation for the regulation of gift vouchers should not be delayed further. On 12 June the Government gave approval for the priority drafting of the unfair contract terms (gift vouchers) Bill. The proposed Government legislation provides that a trader shall not include in a gift voucher contract a term with an expiry date that is earlier than five years after the date of supply of the gift voucher. Importantly, it also gives the Minister for Business, Enterprise and Innovation power to regulate fees for the issue or replacement of gift vouchers and the so-called dormancy fees that apply to inactive balances on certain gift vouchers after 12 months.

The public consultation process on the scheme of the consumer rights Bill produced a large number of responses on the gift voucher provisions. In particular, businesses that issued gift vouchers expressed concern that a complete ban on expiry dates would unreasonably expose them to indefinite liabilities and give rise to accounting difficulties. While a case can be made in principle that gift vouchers should be redeemable indefinitely, consumer law is about striking a fair balance between the rights given to consumers and the obligations placed on businesses. The Minister, Deputy Heather Humphreys, has taken account of the concerns expressed by businesses and the scheme of the Bill approved by the Government provides, as does Deputy Niall Collins's Bill and that of Deputies Catherine Murphy and Róisín Shortall, that gift vouchers should be valid for a minimum term of five years.

In the Minister’s view, this strikes a reasonable balance between the right of consumers to get what they have paid for and the need of businesses for commercial certainty.

While I am in agreement with the aims of Deputy Niall Collins's Bill, there are a number of issues with the Bill. Expiry dates apart, the other main issue that consumers have with gift vouchers is the fees that apply to some vouchers after 12 months. These inactive balance or dormancy fees range from about €1.40 to €3 a month. This can mean, for example, that a gift voucher for €25 can be rendered worthless after just 20 months, in the same way as if it were subject to an expiry date. The Government is strongly of the view that it is necessary for legislation to deal with the issue of fees as well as expiry dates.

Currently, inactive balance fees apply only to gift cards that can be used to purchase goods or services from a wide range of retailers or service providers, or from retailers and service providers in a specific shopping centre or group of shopping centres, and which constitute electronic money within the meaning of the European Communities (Electronic Money) Regulations 2011. Among other provisions, the regulations provide that an electronic money issuer must, at the request of the electronic money holder, redeem at any time and at par value the monetary value of the electronic money.

While there is a strong argument from a consumer perspective that all gift vouchers should be honoured at their full face value, the providers of electronic money gift cards argue that the costs associated with the provision and management of these products, in particular the requirement to ensure that funds stored on these cards are safeguarded by being stored in segregated bank accounts, require the imposition of fees.

The proposed Government Bill provides accordingly that the Minister for Business, Enterprise and Innovation will have the power to regulate these and other gift voucher fees after undertaking consultations. It is the intention of the Minister, Deputy Humphreys, to undertake a short consultation over the summer months on the issue. The outcome of this consultation will inform the subsequent decisions to be taken on whether to prohibit, reduce, retain or rebalance these fees. The draft scheme approved by Government and the Private Members’ Bill introduced by Deputy Collins both provide for a minimum five-year term for gift vouchers, but they do so in different ways. Deputy Collins's Bill proposes to make terms 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.

As this directive is a full harmonisation measure, providing for the regulation of gift voucher expiry dates as part of a prohibition on commercial practices it runs the risk of legal challenge on the grounds of incompatibility with EU law. In the Government’s proposed Bill, the expiry date provision is framed 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.

Deputy Collins's Bill also contains provisions to ensure that consumers are informed of fees for, or restrictions on, the use of gift vouchers. These provisions do not take account however of those gift vouchers that may come within the scope of the E-Money Directive, which are subject to the detailed information provisions of that directive and of the Payment Services Directive. As both of these directives are full harmonisation instruments, applying additional information requirements to these gift vouchers would raise issues of compatibility with EU law and would also represent an undesirable form of double regulation. Possible gaps in the application of the information provisions of the Consumer Rights Directive to certain gift voucher contracts would be more appropriately dealt with in the consumer rights Bill, which it is hoped will be reactivated in 2019.

Ireland currently does not have clear rules on the expiry dates of gift vouchers, which time and time again results in needless confusion and frustration for consumers. It is extremely frustrating if a person, or somebody close to them, has paid for a voucher only to be told it is no longer valid a relatively short time afterwards. Some retailers honour vouchers in these instances but others do not. This is simply not fair and needs to change.

The issue of fees is a particular bone of contention for consumers. As I mentioned earlier, in some instances fees of as much as €3 per month apply to gift vouchers after 12 months. Many people are unaware of this and often discover it only when they go to use the voucher and find that they have a greatly reduced balance.

I commend Deputy Niall Collins on initiating this very worthwhile Bill. While there are some technical problems with the Bill, the Government appreciates the spirit in which it has been brought forward and therefore will not oppose the Bill on Second Stage. For too long the waters have been muddied for consumers with greatly varying expiry dates for gift vouchers. The introduction of a minimum five year expiry date will bring certainty to consumers. The issue of dormancy fees reducing the balance on gift vouchers is also a serious cause of irritation for consumers who have bought the voucher in good faith and paid the full cash value. The Government Bill brought forward by the Minister, Deputy Humphreys, will deal comprehensively with both of these issues and will ensure effective protection for consumers.

I commend Deputy Niall Collins on bringing forward this Private Members' Bill. The Bill aims to address an issue that causes frustration for many people dealing with gift vouchers. Often, only when people go to use these vouchers do they find that the vouchers can be out of date and worthless. Other consumers are affected when the value of their voucher is run down through fees and charges by the company they purchased it from, due to the voucher not being used within a certain period of time.

Due to a complete absence of regulation this is a very grey area and consumers do not know what rights they have while using these products. Deputy Niall Collins referred to the annual spend of €300 million on gift cards and gift vouchers. This is an enormous spend, and clearly action needs to be taken to ensure protection for the thousands of consumers who buy these products each year.

I acknowledge that the Minister for Business, Enterprise and Innovation, Deputy Heather Humphreys, has also indicated her intention to bring forward her own legislation, which I believe highlights the requirement for action in this area. I hope the Minister can bring forward her solutions soon so we can deal with this problem. It is Deputy Collins, however, who has raised the issue and forced the Government into action on the matter. I note that the same thing has happened with my Sale of Tickets (Sporting and Cultural Events) Bill 2017.

This Consumer Protection (Amendment) Bill proposes that companies have to inform consumers in advance about fees that can be charged on the vouchers. Had Deputy Collins considered a cap on those charges or fees to a percentage of the gift voucher value? I suggest this because some of the fees can be extortionate and this would strike a balance between the costs of servicing the voucher and the consumer’s rights.

I have been in contact with a business that wanted me to raise an issue that will arise for them with changes in this area. This particular company sells vouchers for specific described services such as events like motorised racing experiences or hot air balloon trips and so on. 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 because the cost of an event when the voucher is purchased could be very different to the cost five years later. Insurance and fuel costs are constantly jumping, always higher of course, and we can see the company's concern. I ask that 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 particular situation.

Many retailers are very flexible in this area already. Most retailers honour gift vouchers or do not put expiry dates on them. The time period for expiry, however, is a problem in many other instances and legislation is needed to regulate this area.

Sinn Féin supports the Consumer Protection (Amendment) Bill 2017. I hope the Bill is not held up by the Government and that we can move forward to regulate this area.

I am conscious of the limited participation in this debate. Does the Minister of State, Deputy Halligan, wish to add any further significant comment?

I wish to make quite clear to Deputy Niall Collins that the Bill will not be delayed. The Government will support the Bill and will not oppose it. As I said, there are some issues. We discussed the aspect of businesses that may have some difficulties. The One4all vouchers, for example, have a potential issue in that it is a business where a whole tranche of money is held by the company and put into a bank.

There is a legitimate argument that fees attach to that money if the vouchers are not claimed. It is a small issue.

As I have made clear, the Government does not propose to oppose this Bill, which is comprehensive and worthwhile.

I thank the Minister of State for his comments and Deputy Quinlivan for his support. We are all on the same page and want to reach the same end point in terms of consumer protection. The amount of money that is spent on gift cards and vouchers is considerable. Ironically, the people who are most vulnerable to the inadequacies of the law in the unregulated sector are children, who are mainly the ones who receive gift cards and vouchers. That has been my experience.

The Minister of State referenced an Irish success story, the One4all gift voucher, with which everyone in this jurisdiction is familiar. One4all is a well-regulated and well-run business.

It is partnered with An Post, which is a commercial semi-State body. Its model is one to which the unregulated sector should aspire. That the money involved is held in a third party escrow account is a positive and comforting factor for people who engage with that entity, which is regulated under the EU's e-money directive.

I thank Deputy Quinlivan, the Sinn Féin Party, the Minister of State and the House.

Question put and agreed to.

That must be the fastest period I have ever seen in which a Private Members' Bill has passed Second Stage.

We are all working together.

I wish we could do this with many other Bills.

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