U.S. consumers purchase $100 billion in stored value cards (gift cards) each year. However, a significant number of those cards are never used. According the New Jersey Department of the Treasury, approximately $6 billion in gift cards go unspent each year, with the majority of the funds reverting back to the card issuer.
With this in mind, New Jersey lawmakers amended the state’s unclaimed property law (N.J.S.A. 46:30B-1 et. seq.) in 2010. Among other changes, the amended law provides that unused gift card balances will escheat to the State of New Jersey after two years of inactivity. To help track gift card purchases, the law also requires merchants to collect address information from gift card purchasers at the time of sale (a zip code at minimum). The law also includes a “place-of-purchase presumption” under which the address of the place of purchase is substituted for the address of the purchaser, if it is unknown. While most states have laws regarding unclaimed property, New Jersey is the first state to require gift card issuers to gather data that can later be used to collect unused gift card balances.
Since 2010, New Jersey’s gift card law has faced a rocky road. In fact, many of the requirements have not yet been implemented due to legal challenges. Retailers and card issuers have challenged almost every facet of the new gift card law, arguing that it is unconstitutional and preempted by federal law.
In New Jersey Retail Merchants Association v. Sidamon-Eristoff, et al., and two related cases, the provisions applying the new escheat rules to existing cards and the place-of-purchase presumption were blocked by a federal court. While the injunction has since been lifted, the enforceability of the law has yet to be decided.
Most recently, several gift card providers have announced that they will pull out of New Jersey, unless the law is changed. American Express has removed its gift cards from the state and consumers can now only purchase them directly from the company online. Third-party gift card providers Blackhawk Network and InComm quickly followed suit. They argue that the new requirements are too costly and burdensome and have elected to remove their cards from the marketplace rather than comply.
Meanwhile, New Jersey officials contend that the laws were needed to bolster consumer protections for purchasers of gift cards. In its defense of the laws, the New Jersey Department of the Treasury highlights that the law prevents sellers of gift cards from depleting and then taking consumers’ unused balances.
Meanwhile, the card issuers argue that New Jersey simply wants to replace them as the recipient of the cash windfall that is created when consumers fail to use their gift cards. In response, New Jersey officials have pointed out that the law allows consumers to request a reimbursement at any time (although they will likely have to jump through a few hoops to get the money back).