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KeepUP™ Blog

3/7/17 3:21 PM

Reporting Unclaimed Card Balances

by Luke Sims

It can be difficult for holders to understand the intricacies of reporting stored value cards, payroll cards, reloadable cards and gift certificates. It’s not surprising when you take into consideration variations in card types, regulations and technology advances.  With the rapid growth in the card industry, this property category is getting more attention. In fact, the 2016 RUUPA includes several new card specific definitions that holders with a card program should be aware. As stated in our RUUPA blog post many states have adopted or are in the process of adopting the new act. Key definitions included in the act are gift card, loyalty card, net card value, payroll card, and stored-value card.

Legislative activity specific to cards and certificates is off to a fast start in 2017. For example:

  • Oregon SB 113 provides that person identified in a gift card as providing goods or services shall transfer to the Department of State Lands any remaining balance of a gift card that a cardholder has not used within five years after the date of the last transaction using the gift card.

  • New Hampshire House Bill 473 increases the threshold from $100 to $250 above which merchants can sell gift cards with expiration dates. The bill further provides that gift certificates of $250 or less shall not be considered abandoned property.

Accurate escheatment of card balances relies upon a variety of functions. Here are some of the crucial functional areas.

Reporting - In general, escheatment of card portfolios can be treated similarly to other types of property. In many ways, however, they are a property unto themselves that requires special handling.  Nearly every jurisdiction's laws include verbiage related to gift cards, stored value cards, and/or gift certificates. More than 30 jurisdictions offer specific card/certificate exemptions or deductions, while a handful of other states have even taken an administrative position for cards to not be reported.  This complexity makes accurate reporting an intricate task.

Data Management - Card portfolios range from hundreds to millions of cards issued. On top of the quantity of cards, the underlying activity of each card needs to be carefully considered for escheatment purposes (i.e. what constitutes positive owner contact). If your organization has the reporting responsibility and employs a third-party processor, it becomes even more vital that all applicable data points are obtained when considering unclaimed property reporting. 

Legal and Accounting Considerations - Outside of formulating an unclaimed property reporting approach and obtaining a grasp on a card portfolio’s underlying data, card programs present additional accounting and legal issues for consideration. For instance, many jurisdictions limit the applicable exemptions or deductions that can be applied to unredeemed balances by embedding specific language that prohibits card issuers from having expiration dates on cards and/or assessing fees. An organization’s legal structure and purpose may also play into the potential portfolio exposure. Aside from the legal issues noted, contemplation on the accounting treatment of unredeemed balances that are not required to be escheated will be a key consideration of the ongoing management of the card portfolio.

Professional Guidance - Reporting, data management, legal and accounting considerations only touch the surface of card escheatment complexity. We recommend holders consult with professional unclaimed property advisors, who have years of experience and resources to monitor legislative changes, can provide holders with the peace of mind regarding current and future compliance.

Topics: Compliance, Reporting, gift cards