Retailers Form Association To Defend Closed-Loop Gift Cards

The Retail Gift Card Association is recruiting new members with the aim of building a positive image of closed-loop gift cards, getting members to follow an ethics code, and countering the bad publicity directed at gift cards in recent months by consumer groups and legislators monitoring marooned cards whose sponsor retailers have failed. The RGCA announced its birth in early December, but waited until Tuesday to outline its growth plans at the Prepaid Card Expo trade show in Orlando. The group has nine members and is looking to grow to about 40 in its first year, according to association spokesperson Carman Wenkoff, president of Value Pay Services LLC, a prepaid card firm owned by franchisees of the Subway sandwich chain. Wenkoff and Tom Boucher, senior program manager of gift cards at consumer-electronics retailer Best Buy Co. Inc., gave a progress report at the conference. Wenkoff says he and other executives in the closed-loop gift card industry began talking about forming an industry association about a year ago when most of the criticism about gift cards involved fees, unredeemed balances, and expiration dates. The effort took on more urgency as the year wore on and several prominent retailers failed, including The Sharper Image and Best Buy rival Circuit City Stores Inc. The resulting store closures raised questions about what would happen to the unredeemed balances consumers put on those merchants' prepaid cards. Some lawmakers said it was time to consider further regulation of the industry. “We just wanted to get ahead of the legislative movement,” Wenkoff tells Digital Transactions News. The RGCA has applied for tax-exempt status as a not-for-profit organization, and is looking to raise $400,000 to $500,000, according to Wenkoff. Initial money would be used for public-relations efforts promoting retailer gift cards, and lobbying. Membership prices are $5,000 or $10,000, the higher fee giving the member more voting rights and other privileges. The association's directors also are considering hiring a manager to handle a growing list of possible activities. “Right now we've been doing it mostly out of our respective garages,” Wenkoff said at a conference session. On the list is the gathering and dissemination of industry data, which as some conference attendees noted is a touchy issue in the highly competitive retail industry. Wenkoff said the association might use a third party to handle data matters. High-level portions, such as the total number of gift cards in circulation and how many cards are in various industry segments, might be disseminated publicly. Members would get more detailed reports about their market position, but they wouldn't see how many cards other retailers have issued. RGCA membership is limited to retailers, restaurants, and travel-and-entertainment merchants that issue closed-loop gift cards. Besides Best Buy and Subway, current members include Wal-Mart Stores Inc., The Home Depot Inc., Kohl's Corp., Limited Brands Inc., Nike Inc., Applebee's IP LLC, and Marriott International Inc. RGCA has a green rectangular logo crossed by white stripes with a bow, reminiscent of a gift-wrapped package, for its members to display as evidence that they follow the group's code of conduct. He doesn't go into detail about how the standards would be enforced, but Wenkoff says “there will be accountability to adhere to the principles.” That code can be found on the RGCA's Web site, www.TheRGCA.org/Members.html.