CUSOs that issue and sell gift cards, often though agent issuingprograms with credit unions, report that the Federal Reserve'slatest version of gift card regulations will have little impact ontheir operations.

Congress mandated the new rules as part of last year's CreditCard Accountability, Responsibility and Disclosure Act and theFederal Reserve has set Aug. 22 as the date the new regulations gointo effect.

Among the changes is a rule that gift card issuers will only beable charge fees on dormant or inactive cards after the cards havenot been used for at least a year. In addition, dormancy,inactivity or service fees may only be assessed once a month andmust be disclosed to the cardholder.

The new rules also mandate card issuers sell gift cards withexpiration dates of not less than five years after a gift card issold or loaded with funds. It also prohibits issuers from charginga fee for replacing an expired gift card or for refunding aremaining balance.

The new regulations' chief impact on credit union gift cardissuers will be to force a race to make the changes the new rulesmandate by the Aug. 22 deadline, according to Jeff Falk, directorof product development for TMG Financial Services, the branch ofThe Members Group that issues cards, including the Altira card lineof gift cards and other reloadable cards.

“We are going to have to move fast to both get the old stuff outof the pipeline and get the new stuff in,” Falk said. The majorityof TMG's client CUs that sell its gift cards do so with TMG'sbranding, he explained, but some sell the cards with their ownbrands and those were all going to require reprinting he said.

The other impact will have to do with the dormancy or inactivityfees. Falk said the industry doesn't like to use the term“breakage” for the amount of money left on a card after a consumerhas drawn down most of it, but for most consumers, that money'sexistence is a fact of life.

Currently, Altira starts to collect the money left on cardsabout six months after they are issued through the mechanism of afee, usually around $2.50 per month. Most gift cards have most oftheir money used within a few weeks from purchase, he added. Thenew rules mean that Altira would likely still collect fees fromcards that were no longer being used but in the 13th month insteadof in the seventh.

Michelle Thorton, senior product manager for CO-OP FinancialServices, another CU gift card issuer largely agreed with Russellbut suggested that CO-OP might have a slightly easier timecomplying with the new regulations because the CUSO issues giftcards in conjunction with FIS, the largest card vender to creditunions in the country.

“The final rule is pretty much what we thought it would be,”Thorton said.

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