Is New Jersey’s Gift Card Law Backfiring?

by on April 11, 2012 · 2 comments

in Legal News and Trends,Litigation

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).

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Gift Card Girlfriend | New Jersey Has No Skin in the Gift Card Game
April 14, 2012 at 12:02 pm

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Shelley Hunter wrote onApril 13, 2012 at 3:51 pm

Thanks for spelling this out so clearly. I’m a fan of gift cards, but I’m also a programmer and a consumer. Implementing this law seems difficult if not unfeasible. Moreso, it sounds like a total mess for the consumer. And the big question is – who knows the gift card money is ready to be claimed?

1 – The gift card company only knows that an activated gift card has not been redeemed. Even if the company can track who purchased the gift card, the company has no way of knowing who has the physical gift card. It’s a GIFT.

2 – The gift card purchaser–the person who spent the money–more than likely delivered the card to someone as a gift. So the purchaser won’t know the card is unused nor would he/she have the gift card information needed to collect the unclaimed property. The person who spent the money, gave it away as a gift–no different than giving a sweater or book to someone. It’s gone.

3 – So that leaves the recipient. The gift card recipient’s name will not show up in an unclaimed property database because nobody knows he or she has the card. The only way to discover money is owed is for the recipient to find the gift card (assuming it’s lost) or decide to do something about it (assuming it’s been in the wallet for two years), and then go searching for it on a website. Seems unlikely to happen.

Since the card was given as a gift, the rightful owner of the value is the recipient. But nobody knows who the recipient is – or if the person even LIVES IN NEW JERSEY!

Does not make sense to me.


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