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Table of Contents

Lead Story

Card acquiring:
Banking's forgotten family member?

News

Industry Update

Smart phone, smart payment

Open-loop gift card issuers given reprieve

Congress hammers issuers, acquirers spared

Trustwave alerts hospitality sector

Features

Conference on your desktop

MWAA, a focus on opportunities

PCI unlocks a treasure of security content

ISOMetrics:
Acquiring by the numbers

Selling Prepaid

Prepaid in brief

Virtual card delivers instant rewards

Payroll card market opportunities beckon

Rate this market: African immigrants

Views

VoIP not a secure option

Scott Henry
VeriFone

Bad things happen to good people

Biff Matthews
CardWare International

Education

Street SmartsSM:
Trusty tips for terrific networking

Jon Perry and Vanessa Lang
888QuikRate.com

Margin compression: It's in your hands

Jeff Fortney
Clearent LLC

Elegant e-mail marketing

Daniel Wadleigh
Marketing Consultant

Seven steps to a practical PCI program

Tim Cranny
Panoptic Security Inc.

Company Profile

Sterling Payment Technologies

New Products

Wi-Fi installation simplified

WiFi-in-a-Box
VeriFone

Automatic collections with RDC

Electric Check Processing Plus
CrossCheck Inc.

Comprehensive e-commerce platform

BancRunner
Universal Financial Systems Inc.

Inspiration

Strength in cooperation

Departments

Forum

Resource Guide

Datebook

A Bigger Thing

The Green Sheet Online Edition

June 08, 2009  •  Issue 09:06:01

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Open-loop gift card issuers given reprieve

Players in the prepaid industry can breathe a sigh of relief. An amendment to the Credit Card Accountability Responsibility and Disclosure Act of 2009 (The Credit CARD Act) that would have severely reduced, if not entirely eliminated, the availability of open-loop, network-branded prepaid gift cards to consumers was modified by the U.S. Senate before President Obama signed the bill into law.

According to Brad Fauss, Senior Vice President and General Counsel for prepaid program manager and processor Springbok Services Inc., the unmodified version of the bill's amendment - called the Fair Gift Card Act of 2009 - would have prohibited issuers from imposing dormancy or service fees on both closed-loop, private-label gift cards and open-loop, network-branded cards.

In "The Fair Gift Card Act of 2009: Good intentions, disastrous results," written by Fauss and published in the April 29, 2009, edition of SellingPrepaid E-Magazine, Fauss said lumping the two types of cards together under one-size-fits-all rules would have disastrous results for issuers of open-loop, network-branded cards.

Open the closed door

Closed-loop gift cards can only be redeemed at the retailer from which they were purchased. In contrast, open-loop, network-branded cards can be redeemed at millions of disparate businesses worldwide since Visa Inc.- and MasterCard Worldwide-branded cards are accepted virtually worldwide.

Fauss said retailers receive the bulk of the funds loaded onto both types of cards. In the case of closed-loop gift cards, the retailers that issue the cards receive all funds loaded onto the cards. For open-loop cards, the businesses where the cards are used receive the amount spent by consumers, while the issuers of the cards make money primarily on fees attached to the cards.

Therefore, "if the primary revenue sources for prepaid cards are eliminated by restricting service fees, these products will no longer be profitable and may no longer be offered," Fauss wrote.

According to others who studied the amendment, the service-fee provision had potentially radical consequences for acquirers and their partners who sell prepaid card services. The Electronic Funds Transfer Association, an interindustry association focused on promoting the adoption of electronic payment systems and commerce, urged Congress to scrap, or at least modify the prepaid card provision. Fauss reported that Sen. Charles Schumer, D-N.Y., who was behind the drafting of the original legislation, introduced a modified version of the amendment that adequately remedied his - and the industry's - concerns.

Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.

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