Gift Card Association Rounds Up Members

    Gift Card Association Rounds Up Members

    Takes on Effort to Battle Poor Public Image
    Edition: April 15, 2009
    Rivka Gewirtz Little

    The Retail Gift Card Association is ramping up efforts to recruit new members to quell attacks by consumers groups and growing negative public opinion.

    Consumer groups have long railed against expiration dates on gift cards that have left consumers empty handed if they wait too long to use them. But things have gotten worse this year when the economy turned and retail chains like Circuit City went bust. Then the Consumers Union warned users to stay away from buying cards that could eventually be left for dead after chains went bankrupt.

    “As we started seeing some of the push back from consumer groups regarding concerns over bankruptcy and expiration dates, we quickly determined that getting together to deal with public interest and legislative matters with one voice was important,” said Carman Wenkoff, a co-founder of the organization and the president of Value Pay Services LLC, a prepaid card firm owned by the Subway sandwich chain.

    The RGCA fully acknowledges the problem with expiration dates and plans to take a stand.

    “We’re going to really drive a stake in the ground with expiration dates and dormancy fees, asking [members] to formally commit to not having these fees of any type,” Wenkoff said.

    “We expect mixed response. All of the large brands see the wisdom in doing that, but we realize that initially there may be a number of retailers who currently have expiration dates or dormancy fees that want to keep that right. We want them to reconsider. This is our opportunity to be proactive and shape the future,” Wenkoff said.

    The problem of how bankruptcies affect gift cards is a bit of a stickier conversation.

    “There have been a number of reorganizations, but I can’t think of any examples [of bankruptcies] where the consumer hasn’t been given time to redeem gift cards. Even if the company has gone into Chapter 11 they have been able to go to the courts and ask to honor gift cards for a period of time,” Wenkoff said.

    Providence College professor Daniel R. Horne, who studies the retail industry, gift cards and consumer behavior, says larger retailers have long been consumer friendly and really haven’t been the offenders on the bankruptcy front.

    “The problem isn’t big retail. It’s not Subway and Best Buy and Target and Marriott. They have big brands and are committed to being consumer friendly and customer focused. But what do you do about the person who has the three-restaurant chain that goes belly up?” Horne said.

    Big retailers need to differentiate themselves from smaller players in order to improve their public image and deal with consumer groups, but that’s not always easy.

    “The real problem is they need to differentiate themselves from the potential weak ones so they’re not tarred with that same brush,” Wenkoff said. “That’s a hard message to get across. You don’t want to come across as being negative, or being self-serving, or being the big guy kicking the little guy.”

    The RGCA is looking at possible solutions for the bankruptcy problem, Wenkoff said, but some fixes requested by the Consumers Union won’t work.

    “The Consumers Union has filed a petition with the FTC asking that special trust accounts be carved out for gift card funds. That’s not possible, but there are other compromises,” Wenkoff said. “[Some have] suggested amendments in bankruptcy laws so that gift cards are allowed to be redeemed even without petitioning the court.”

    Horne said another option is writing insurance policies on gift cards.

    “They can insure the products of the companies that are members [of the association]. So if you buy a card that has the RGCA logo, then it’s insured,” Horne said.

    But during challenging economic times that could be a more costly effort than some are willing to take on.

    “This is all set against a backdrop where retailers are really struggling financially. For these guys to get together and say we want to insure each other’s stuff is going to be an effort with some cost attached,” said Horne, adding that association members could consider going to Lloyd’s to have an insurance policy written outside the group.

    If the insurance move is too costly, a good first step would be to place the RGCA logo on all members’ cards, which will signify that the company follows consumer-friendly standards set by the group, Horne said.

    In the first year, the RGCA is looking to recruit between 40 and 70 major brands as members, and Wenkoff expects the group to maintain between 60 and 70 members annually. The founding members include Applebees, Best Buy, Home Depot, Kohls, Limited Brands, Marriott, Nike, Subway and Wal-Mart.

    The good news in starting an association with leading brands is that even retailers that don’t join will eventually be pulled along to follow standards.

    “If this becomes what the people who are really the core of the group are trying to accomplish, … then over time having that high standard will raise the bar for everybody,” said Horne. “If Marriot is doing it, then the other hotel groups have to do it too.”

    RGCA members must make a $5,000 commitment for annual fees and must be a retail store or restaurant. Wenkoff said the organization decided not to allow other types of members or to accept sponsorships so as not to “muddy the waters” and so they can “make the agenda 100 percent relevant to members.”