WASHINGTON -- While new gift-card rules handed down by the Federal Reserve in March reward consumers with five-year expiration dates and curtailed fees, retailers will have to prepare for a major swap out and in some cases, placement adjustments, providers tell CSP Daily News.
The new rules mean that all gift cards that do not meet specific requirements will have to be taken out and replaced by Aug. 22 of this year, said Allen Preslar, general manager and vice president of e-payment services for Coinstar Inc., Bellevue, Wash.
New cards can't expire for at [image-nocss] least five years, and issuers won't be able to charge replacement fees for expired certificates or cards. Issuers also can't charge fees for refunding remaining balances or for inactivity unless the card has not been used for at least a year. In addition, "clear and conspicuous" disclosures must be made.
Other provisions require separation of gift and reloadable prepaid cards. They can be on the same fixture, but must be in separate areas with appropriate signage, say suppliers.
The Federal Reserve issued the rules on March 23, implementing provisions of the CARD Act passed by Congress last year.
"We believe that new fee requirements and notice provisions will have a positive effect on the industry," Preslar said. "Most of the changes are designed with the consumer in mind: clear labeling of fees, extending expiration dates, making sure all costs are known before purchase, and no added fees after purchase. We expect these changes will encourage more consumers to purchase gift-card products."
"It's no doubt going to be a big job," Jerry Welch, chairman and CEO, nFinanSe Inc., Tampa, Fla., told CSP Daily News. "[Suppliers] are holding out hope that possibly there can be relief. It's a big task if you think about all the people who provide gift cards."
For retailers, Welch said, they'll have to have employees get old cards off shelves, ship them back to suppliers so they can be destroyed and then receive the new cards and execute new placements. In terms of the gift and reloadable card placements, Welch agreed with the measure, saying that today's structure doesn't necessarily make clear which cards are which.
Commenting on the impact of the new rules, Welch said, "Certainly the legislation is well intentioned, but anytime you do something like this, you have the law of unintended consequences. For folks issuing cards, it's going to require we do things differently. It will affect all of us who offer gift cards."
Officials with Atlanta-based InComm said they are reviewing the matter, but that it's too early to comment on the full ramifications of the new rules.
According to Preslar of Coinstar, retailers' biggest task will be compliance. "[The Aug. 22] deadline is right before the busiest time of their year for prepaid sales in c-store locations and poses potential challenges," he said.
Among these challenges: Understanding which cards are affected. Ensuring all cards in a store are compliant. Replacing non-compliant cards. Introducing new, compliant products. Receiving and merchandising the new inventory. Updating signage on displays with the governed products. "To address these challenges in a timely fashion, retailers will need to partner with knowledgeable, hands-on, prepaid distributors who do more than simply ship cards to store locations," Preslar said.
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