In 2009, Palmer co-founded program management technology company Wave Crest Holdings Ltd., where he serves as President. Among the many other hats he wears, Palmer owns and operates Funderdome, an indoor children's playground and café in South Florida.
SellingPrepaid: As a "founding father," how do you characterize the current state of the industry?
Gary Palmer: My overall reaction is that the industry is growing in a way that I'd hoped and thought that it would back in 1999. I'm seeing great success and adoption of cards and recognition of the value that's created in the three main categories that I think of these cards, which are consumer-funded cards, corporate-funded cards ranging from everything from rebates to promotions to payroll, and then government-funded which has really exceeded my expectations.
On the downside, I never thought that consumer groups would be so blind to value created versus alternatives that exist and that there would be such a piling on of negativity around these products. And that's kind of the one disappointment that I have.
What I found shocking and disappointing was the approach by some to really attack the industry as a whole and try to [promulgate] regulations and rulemaking as a way of dealing with things that should have been dealt with in a constructive and proactive way. And also the desire to paint the entire industry and every player in the industry with a negative brush. And, in some cases, using formulas and models to tell a story that isn't based on reality and fact. And people actually listen to the nonsense and believe it.
SP: Did you recognize the industry's potential back in the 1990's?
GP: I was one of the early guys – and one of the few early guys – who saw for example the possibility of explosive growth for gift cards. I'm walking down the street in Philadelphia today on the way to a meeting and walked by a bank and, literally, there's a big poster in the window of the bank that says, 'Buy your Visa gift card here.' One of my colleagues walking with me said, 'Gary, you spoke of this in 1997 and 1998 and 1999 that retailers would be selling Visa gift cards and banks would be selling Visa gift cards, and no one believed you.'
SP: What are your thoughts on federal and state regulation of the industry?
GP: I feel very strongly that what we should have done is taken the leadership role and encouraged Congress to codify regulations for prepaid cards. The reason I think we should have done that is that when you look at prepaid cards from a legal perspective, prior to what's been happening the last couple of years, there was no single place in the regs to look for rules that applied to prepaid cards.
So if you had a reloadable card where you had consumer information, then it was logical for everyone to look to Reg E [that implements the 1978 Electronic Fund Transfer Act] for the laws and regulations that apply to that card. But if you had a nonreloadable, very limited, small-dollar denominated prepaid card, that card was not treated as an account under Reg E and you looked to another place in the regulations for that card.
And this sort of ambiguity caused people to say, 'There's no regulations over these products.' And that's patently untrue. But because it wasn't clear and [the] industry didn't go to Congress and say, 'Look, here's some model legislation. These are the laws that apply to prepaid cards today. Let's assemble them into a single category the same way we did Reg E for debit cards and Reg Z [that implements the Truth in Lending Act of 1968] for credit cards.
'Let's have a series of regs for prepaid cards that distinguish between the various types of cards, whether they're nonreloadable, small dollar, anonymous versus those that are reloadable by consumers, etc., so that there is no confusion – that there's no misunderstanding – that these products are highly regulated, that consumers have fantastic protections under the law.'
And I think that if the industry had been more proactive, some [legislation] could have been headed off at the pass.
SP: Do you believe states should regulate the fees issuers and program managers charge consumers?
GP: I'm an advocate of clear and powerful consumer protections. I am not an advocate of fee regulations. That is government gone too far. … Consumers ought to be protected in terms of disclosures and clear and understandable terms and conditions. They ought to be protected in terms of their private information and the funds on these cards. But if consumers have the full ability to look at the fees that are associated with these cards, whether we think they are outrageous or whether we think they're too low, that's not the point. The consumers should have a choice as to whether they buy a product or not, based on fully understanding the fees.
But what we're already seeing happen is that states have passed laws that have now made it impossible for things like Visa gift cards to be offered in the state. Is that the consequence? Is that what we really want? We still live in a free country. Consumers should be able to choose for themselves whether they want to spend $1.00 for McDonald's coffee or $4.95 for Starbucks. They should be free to choose whether they want to buy me an ugly tie for my birthday or they want to give me cash or whether they want to give me a $50 Visa gift card.
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