A sizable portion of the billions that Canadians spend on gift cards is never redeemed. Estimates range from 10% to 19%.
Ontario’s portion of this so-called “breakage” may soon end up in government coffers under Ontario’s new Unclaimed Intangible Property Program, which some say will put a costly burden on the marketing industry.
The stated goal of the new program is to reunite people with their long-lost property – everything from insurance money to unpaid wages. But before such property is claimed, the program suggests the funds be held and used by the province.
The Ontario government has not drafted laws on this issue yet, but it has been soliciting feedback from stakeholders – a usual precursor to new legislation.
“Some marketers think that things like unclaimed property or escheat laws are boring, yawning issues, but if this law isn’t properly put into place, it could put a pretty severe financial and administrative burden on programs,” said Bill Hearn, a lawyer at Davis LLP in Toronto who specializes in advertising and marketing law.
Companies would be expected to make efforts to notify owners of their unclaimed property before it’s transferred to the government, which would require collecting consumer information when the gift card is bought.
Even then, since cards are gifted and sometimes re-gifted, the chances of tracking down the rightful owner would be “minimal, if not impossible,” said Wally Hill, senior vice-president of government and consumer affairs at the Canadian Marketing Association (CMA), in a recent written statement to the Ontario Ministry of the Attorney General.
Gary Rygus, Ontario director of government relations at the Retail Council of Canada, said the retail sector is “challenged to find the value of the legislation. We only see the increased administrative burden. There’s no upside, just disruption in the relationship between the customer and the retailer.”
In the worst-case scenario, Hearn said, gift-card providers may simply stop operating out of Ontario. After New Jersey introduced a similar law in 2010 that transfers “abandoned” gift-card balances to the state after two years of inactivity, some companies such as American Express chose to pull its gift cards from the state rather than comply.
The CMA is urging the Ontario government to exclude gift cards and loyalty programs from the proposed legislation – the approach taken by Alberta in 2008. “The [only] province that has developed a modern unclaimed intangible property law did see fit to specifically exempt gift cards and loyalty programs,” said Hearn.
