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Table of Contents

Lead Story

Translating tech for profit


Industry Update

UBC hopes to cash in with free program

Canadians' call for regulation rejected

Fire shuts down processor


GS Advisory Board:
Vertical market virtues - Part II

Allied vendors speak

History of payments technology

Selling Prepaid

Prepaid in brief

Incentive card usage reflects difficult economy

End-to-end payroll

Gift card legal perils - Part II


The cards, they are a changin'

Patti Murphy
The Takoma Group

Mobile payments in the mainstream

Tim McWeeney
WAY Systems Inc.

Dude's got my money: What can I do?

Theodore F. Monroe
Attorney at Law


Street SmartsSM:
Unexamined emotion, a pit bull that mangles business

Jon Perry and Vanessa Lang

Understanding chargeback rules

Ken Musante
Moneris Solutions

Seven rules of 'celling'

Dale S. Laszig
DSL Direct LLC

Moving the needle on level 4 merchants

Joan Herbig

Use technology to tighten relationships, expand revenue

Shan Ethridge
TASQ Technology Inc.

Company Profile


New Products

Self-assessment assistance

Network Merchants Inc.

Pocket-sized terminal

Way Systems Inc.


Time for a change?



Resource Guide


A Bigger Thing

The Green Sheet Online Edition

July 27, 2009  •  Issue 09:07:02

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Gift card legal perils - Part II

At Prepaid Day held during the Electronic Transactions Association's 2009 Meeting & Expo, Daveed A. Schwartz, Attorney at Pillsbury, Winthrop, Shaw, Pittman LLP, ad-vised gift card program managers of what areas in gift card laws should be given special attention to avoid getting into legal trouble.

Trouble may come in the form of a knock on the door from a representative of the Federal Trade Commission, the U.S. Department of Justice, state attorneys general, or city or county district attorneys, he said.

Factors pertaining to prepaid cards that attract the attention of such entities include:

The issue of having expiration dates in jurisdictions that don't allow this is "a big problem," Schwartz said. "Most companies and ISOs are hip to that, but not everyone, believe it or not."

Details, details

Program providers can even run afoul of the law when expiration dates are valid.

As an example, Schwartz offered the following scenario: An ISO registered with a national bank sets up a merchant with a gift card mall in April 2009.

In accordance with state law, the cards that populate that mall come with legal expiration dates. But the expiration date on one batch of cards is June 2009, only two months after the mall was implemented.

When a customer purchases one of those cards, he or she fails to notice the card's expiration date, which is not prominently displayed.

Four months later, when the gift card's recipient finally uses the card, the expiration date has passed and the recipient must pay a reactivation fee to access the funds on the card.

"That's a problem," Schwartz said. "That's where you could get [in trouble], even though you have a legitimate expiration date on the card, because it's too close to when the sale of the card occurred.

"I would recommend that ISOs pay close attention to open-loop gift cards with expiration dates. What are the expiration dates? Are you stocking [cards with] expiration dates that are coming up too quickly in the future?"

Fatal conditions

Another area of emerging litigation is in discrepancies in terms and conditions, Schwartz said.

For instance, the terms and conditions outlined on a card may differ from what is posted on a Web site. Or the language on the outside packaging may differ from the language on the card. Even if it's a simple typo, lawyers have exploited that lack of coordination, he said.

"If you're an ISO, are you going to rely on the card issuer to craft the terms and conditions and then let the issuer put your name on the card?" Schwartz said.

"If you're going to do that, you should do some due diligence. Because if it comes time for a lawsuit, the people that get named are going to be the card issuer, the ISO and the major stores in which the card is sold.

"So there are all sorts of ways in which you can get sued. And you've got to think about these things up front. You can't just default to or rely on the card issuer [or] you're really putting yourself at risk."

When entities are found liable of misrepresenting or defrauding consumers, the penalties can be "fairly draconian," Schwartz said. Civil judgments can range from $5,000 to $25,000 per violation, he added.

According to Schwartz, the way to deal with such potentially devastating civil actions is to avoid them in the first place. "You want to do your due diligence, adhere to best practices and engage in risk management so that you don't have to talk to a guy like me," he said.

For more stories from SellingPrepaid E-Magazine, as well as breaking news and forums devoted to the prepaid sphere, please visit

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

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