US Banker takes a good cross-industry look at the fallout of the CARD act on gift cards
But implementing the required changes will be a challenge, and many worry the short time frame for doing so could hurt sales just as the busy holiday season starts to get underway.
"The industry was hoping they could keep the old plastic on the shelf until January because of the holiday season coming up," says Judith Rinearson, a partner at law firm Bryan Cave, who represents the Network Branded Prepaid Card Association and Retail Gift Card Association. Instead, "everyone is scrambling," she says.
Prepaid players such as American Express and Green Dot Corp. prepped for the regulations by dropping fees, adding disclosures or making changes to the expiration dates on their gift cards. Still, many in the industry are worried about upfront costs that issuers are likely to pass on to consumers—which ultimately could dampen sales.
They also anticipate a possible shortage of prepaid cards for sale to consumers, because issuers are going to have to replace cards sitting on retailers' shelves that won't pass the Fed's muster after August.
John Barbella, senior vice president of the payment solutions group at the $2 billion-asset Bancorp Bank in Wilmington, Del., says the main challenge for prepaid issuers like his company is coordinating with all touch points in the gift-card loop—distributors, card associations and retailers—to account for the whereabouts of the stock that needs to be replaced....
Rinearson says manufacturers are having trouble including all the necessary disclosures of terms and conditions on the cards. "The rewards cards have to have the words 'promotional rewards card' on the front—it can't be a sticker," she says. And if a card expires in less than seven years, then there also has to be a disclosure on the card's face explaining that the "card expires, but the funds do not," says Rinearson.
Prepaid Expo falls in early March next year, so it should be a good time to take a look at the first wave of fallout of the August implementation.
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