Anthony Anton and Rachel Smith, presidents of the Washington Hospitality Association and the Seattle Metropolitan Chamber of Commerce, respectively, responded to potential escheatment legislation that would impose stringent three-year limits before the state would escheat unused funds.
The business interest association leaders described their opposition in an op/ed in the Seattle Times commenting on Washington’s already consumer favorable gift card regulations:
“Current gift card law in Washington is among the most consumer-friendly in the nation — and has been for two decades. In the early 2000s, the Legislature unanimously passed a bill that our Democratic government signed into law guaranteeing that gift cards would never expire, that government would never seize gift card balances as “unclaimed property,” and that there would be no fees to buy or use them.”
The business organizations believe that the escheatment regulations would be punitive not only to the business that would need to work out new policies for compliance, but also to consumers who could see the value of misplaced or otherwise unused cards disappear. They also point out that in order to protect value for the end consumer, individuals would be forced to provide contact information to register gift cards, an unlikely scenario for many cards, especially lower-value cards.
The article also points out the difference between accounting for breakage of unused funds and the reality that even after absorbing the income through breakage, retailers must still honor the value of the unused card, due to the lack of an expiration date. As Anton and Smith noted:
“If you received a home improvement store gift card 15 years ago on your wedding day and found it in your garage yesterday, it can still be used to help pay for your teenager’s room makeover project tomorrow.”
The accounting function of breakage operates completely separately for the recognition of gift card value. Any new income received in the scenario Anton and Smith exemplify would reduce the amount of breakage recognized in that future year. The sponsoring retailer would not earn any additional income and the consumer, already protected by the previous legislation removing expiration dates, received full value of their gift. In addition, the sponsoring retailer would continue to incur the costs of managing gift card programs, which they see as a solid investment. These costs include program management fees, third-party retail discounts, technology investments and other potential expenses.
The continued growth of retail gift cards, which Javelin projects in our 20th Annual U.S. Closed-Loop Prepaid Card Market Forecast, 2023-2027 to grow at a compounded growth rate of 8% through 2027. Retail gift cards represent both the largest closed-loop segment with more than half of annual load value across all segments as well one of the strongest growing segments, validating the costs incurred.