New rules for recognition of revenue from the sale of gift cards have taken effect for public companies. In the first quarter of 2018, these new rules affect the way companies must recognize revenue associated with gift cards and other prepaid cards, especially for amounts that are never redeemed. Many companies deal with the uncertainty around unclaimed property by structuring their gift card programs so that they are set up in states that do not regard gift cards as unclaimed property.

Those structures may be facing a serious legal challenge, however, as the state of Delaware pursues legal action against a company administering such programs. An aggressive collector of unclaimed property and home to a large number of corporations, Delaware is of the view that such structures are fraudulent workarounds designed only to subvert unclaimed property law.

The state is pursuing action against Card Compliant, an Ohio-based corporation that assists companies in setting up entities specifically to issue gift cards in states that are not interested in collecting unredeemed gift cards as unclaimed property. The case initially involved dozens of defendants, but for various reasons many have been dropped from the litigation, says Robert Peters, managing director at Duff & Phelps.

The remaining defendants, numbering fewer than a dozen now, says Peters, filed a motion to dismiss in 2017, and that action is still under consideration by the court. Now Delaware’s audit program is targeting companies that have formed captive and third-party gift card arrangements, he said.

Gift card breakage is generally rising just judging by the rising breakage figures that companies are recording in financial statements. More and more people are not using their gift cards, so companies have to figure out how much to report and when while also contending with uncertainty over unclaimed property actions.

Audit Analytics estimates the breakage rate is roughly 2 to 4 percent, based on its analysis of public company filings. The research firm says nearly 50 companies have identified gift card breakage as a figure that will be significantly affected by the new accounting requirements of ASC 606.

AuthorJohn Rusher

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Included among their products and services are Roomie and DVD Now.

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AuthorJohn Rusher

Reprinted from USA TODAY, Aug 11, 2017

Every once in a while, an email or Facebook posting makes the rounds sounding alarms over the supposed danger of used hotel card keys. To stay safe, the reasoning goes, travelers must carefully dispose of them.

To test whether a lost hotel key contained valuable data, say the number of the credit card you used to pay for the room, USA TODAY took a stack of used hotel key cards to the Black Hat computer security conference in Las Vegas recently and had an expert see what exactly they contained.

The verdict?

“You’ve got nothing to worry about. There’s nothing on here at all except the room number and a date field,” said Mickey Shkatov, a security researcher at McAfee, after he methodically swiped them all through a card scanner he'd brought along. “All clear,” he said.

The origins of the scare go back to a notice sent out by a California police detective over 15 years ago claiming that hotel card keys could contain a hotel guest's name, home address and credit card number and that the information stayed on the card until the hotel overwrote them for a new guest.

An investigation by found that the presentation the detective had seen actually featured a blank hotel card key which had been used by cybercriminals to store stolen information about a victim and was in no way connected to a hotel.

Not that hotel card keys should be left laying around where anyone can get to them. Next Shkatov asked to see the key for the hotel I was staying at during the conference.

“Now this I can do something with, I think,” he said.

He ran the key through the card reader, tapped a few keys andthen ran one of the blank cards he’d brought on eBay through the machine.

“Try this when you get back to your hotel,” he told me.

The cloned key worked perfectly throughout my entire stay.

Least privilege, most security

The credit card-sized plastic keys used by most hotels today contain at most four pieces of information — which room the key is for, when the key can begin opening the door, when it should stop working, and, sometimes, a guest number.

When the desk clerk types furiously into their key coding machine and then swipes the card through, that information is being transferred to either the magnetic stripe on the back of the card or, in newer cards, the chip embedded in it.

When the guest inserts the key into the room's door lock mechanism, the key tells the lock that it’s meant to open the door to that exact room, when the guest can begin occupying the room and when they have to have checked out, said Christopher Balch, with Maglocks, a lock system company based in Amsterdam, N.Y.

In many ways, hotel key cards are a great example of what the computer security world calls “least privilege,” the concept that to maintain security a system should have only enough privilege to access the information it needs to get its work done and no more, said Steve Grobman, McAfee’s chief technology officer.

“For a hotel key card, it should only have the data on it that it needs to do its job. For example a time stamp, so if you’re in the room from Monday to Thursday and you try to use that key on Friday, it doesn't work,” said Grobman, who oversaw the card-testing.

Sometimes, systems also include a guest number that lets the software track who’s gone in and out of a room.

“It’s not really a name, it’s just an encoded guest number which maps back to the software for the lock system. It gives you an audit trail so you know who accessed the room,” said Balch.

Cheaper, better keys

Most hotels stopped using actual metal keys because programmable cards are cheaper and more versatile. With a metal key, a guest who forgets to return it could open the door to their room days or even weeks later, meaning the hotel might have to go to the expense of changing the room’s lock.

Metal keys are also expensive to replace, while the plastic key cards can go for as little as 10 cents if they’re magnetic stripe and around $1 per card if they contain a smart chip, said Balch.

They’re also pretty strong, which is a plus given that people tend to stick them in pockets, close them in suitcases and generally abuse them.

“They’re reusable to the point where we offer a lifetime warranty,” Balch said.

As for  cloned hotel room key, McAfee's Grobman said all current cards should be treated just as you'd treat an old fashioned room key and not be left laying around where someone might make a copy.

In the old days, that might have meant making an impression in a bar of soap or spiriting it off to a key-cutting machine. These days it would require simply a quick swipe through a magnetic card reader/writer machine connected to a computer. These machines can go for as little as $100 on eBay. That said, copying chip cards, which are increasingly being used by hotels, is a much more expensive, time consuming and difficult process. 

AuthorJohn Rusher


Security at hotels and resorts is of the utmost importance which is why they moved from traditional lock and key systems to magnetic card systems, and more recently to RFID (smart chip) systems. All enable the hotel to change the access code information, and control the period of time that a particular card effectively interfaces with the particular lock. And contrary to some reports, no guest information is stored on the actual key card.

Magnetic Key Cards have a stripe on the back that is programmed at the front desk at check-in. Magnetic cards come in two sizes.... cr80 (3-3/8" by 2-1/8") which is the same size as a credit card, and cr50 (3 ½" by 1 ¾") which is about 25% more narrow. The cr50 card is fairly uncommon, but may still be in use at some older hotel properties.  

There are a lot of different magnetic locking systems or brands, but they all typically use one of two types of magnetic stripes on the back....either a BROWN stripe (300oe) or a BLACK (650oe). The oe is a measure of magnetic strenght or coercity. The brown stripe is the most commonly used. It is important when discussing the program with the hotel to inquire as to what locking system and encoder they use, and request a current key card to verify the type of magnetic stripe.

RFID Cards have a radio frequency computer chip inside of the card, therefore no stripe on the back. The chips in the cards vary from one locking system to another.  One of the most popular brands is Onity. We can provide printed cards for most RFID systems, but they are 3 to 4 Xs more expensive. We typically include a message on the card to return it to the front desk at check-out so they can be re-used.

VING is a high-end system that requires a special chip, and that is priced nearly double the cost of the Onity rfid cards. You may find it hard to justify the expense of providing cards for any hotel that has a VING RFID lock system.

We typically print key cards in quantities of 1,000 in order to provide the best price. We package them 500 to a sleeve, so an order of 1,000 will require two (2) sleeves. We box 6 sleeves to a carton, so 3,000 cards per carton. We can usually ship the standard cr80 cards in approximately two weeks. We can ship to the store, or directly to the hotel.

Hope this is helpful. Let us know if you have any other questions. Your team is welcome to call us most any time. 866.439.9581

AuthorJohn Rusher