Card Compliant Granted Patent on Escheat Management, Breakage, Revenue Recognition Platform (Sept. 30, 2014)
Technologies from Card Compliant aim to help prepaid issuers manage the regulatory and compliance challenges presented by accounting standards and escheatment requirements. The Kansas City, Mo.-based compliance specialist has been granted a U.S. patent related to these services, which enables issuers to compute and pay the exact amounts that are subject to escheat under unclaimed property laws of states and other jurisdictions, and forecast future amounts subject to escheat by predicting redemption and breakage rates. The system also enables issuers to employ derecognition, an accounting technique used to reduce the card liability on a company’s balance sheet from unused cards, thus avoiding inflated obligations on the issuer’s financial statements.
The patents relate to the methods, processes and systems architecture underlying the rules-based processing platform. “The patents are timely,” notes Tori Blake, vice president of accounting technologies and operations, Card Compliant. “The Financial Accounting Standards Board and the International Accounting Standards Board recently released a new revenue recognition standard which addressed the recognition of revenue in prepaid card programs. The breakage and revenue recognition platforms comply with the requirements within the new standard,” Blake tells Paybefore.
Card Compliant plans to extend the patented technologies to the mobile space. “When a company expands its traditional prepaid card program to mobile, it can alter the escheat profile, the breakage, and other attributes of the program,” explains Amanda Culp, JD, assistant general counsel, Card Compliant. “The patented technologies will integrate well and have interesting features for mobile,” Culp adds.
Escheat laws have been a hot-button issue over the past several years, as states have stepped up attempts to capture unredeemed gift card balances to address budget shortfalls. In 2010, New Jersey passed a law requiring unused funds on prepaid cards to escheat to the state after two years of inactivity and mandating the collection of purchasers’ ZIP codes at the time of purchase of a prepaid product. After the ensuing industry outcry, the period of inactivity was pushed to five years and the effective date of the law with respect to ZIP code collection delayed until July 2016. Similar fracases over escheat have broken out in other states.
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