Do You Have a "Grip" on Your Gift Card, Rewards and Incentive Programs?

Based on recent developments, all organizations that issue, or are considering issuing or expanding their gift, reward and/or loyalty programs, should review the structure and operations of these offerings.

The implications of these developments can range from minor tweaking of how a retailer/ merchant manages its gift card program to a major overhaul in order to avert catastrophic adverse consequences such as subjecting the gift card breakage to states’ unclaimed property laws among others.

Among the developments which could impact virtually all gift card issuers include:

• A pending whistleblower lawsuit instituted against a series of retailers, which puts at risk prior contractual arrangements entered into with third-party providers;

• New and enhanced gift card, rewards and loyalty product offerings, many of which are intended to increase contact, brand awareness and the ease in which customers can enhance their “shopping experience” may heighten risks among consumer protection and unclaimed property laws;

• Recent favorable court decisions for retailers who issue store credits for return merchandise in the form of preloaded gift cards;

• Increased audit activity conducted by contingent fee third-party audit firms working on behalf of a majority of states, which are closely scrutinizing the arrangements entered into by related parties; and

• Newly issued accounting and tax guidelines impacting the manner in which all gift card issuers will be required to record gift card revenues for tax and financial reporting purposes.

Each of these developments provide opportunities and/or potential pitfalls for those that, through no fault of their own, may not be mindful of the implications in a dynamic marketplace where the rules and regulations covering gift cards and related products are failing to keep pace with the new product/service offerings.

Duff & Phelps Gift card Rewards and Incentive Program “GRIP”

In order to aid organizations in addressing the tax, financial, unclaimed property and legal* implications of gift card, reward and loyalty program offerings in today’s changing landscape, Duff & Phelps has developed Gift Card Rewards and Incentive Program "GRIP", to assist organizations, with reviewing their existing or planned arrangements.

*Legal services to be provided through our law firm alliance partners.