A New Jersey Senate bill was recently signed into law, amending the state’s unclaimed property law as it relates to gift cards. As you may recall from our earlier alert, the law previously required all gift card distributors in New Jersey to collect, at a minimum, their patrons’ ZIP codes to determine their state of residence and to then send all unused revenue on cards purchased by or owned by New Jersey residents to the state after a dormancy period of two years. This law resulted in several companies, including American Express and Black Hawk Network, withdrawing their cards from the state and in litigation over the law. Now, the New Jersey Senate has stepped in with several amendments that serve to push back the enforcement of the most contentious part of the law—the ZIP code collection portion. While awaiting the state treasurer’s guidance on complying with the law, both American Express and the governor have petitioned to the US Supreme Court to take a stance on the constitutionality of the law as well.
The revised law made several notable revisions including (1) delaying enforcement of the ZIP code collection requirement, (2) requiring only 60 percent of the unused value of store gift cards to escheat to the state, while maintaining that 100 percent of reloadable gift cards issued by banks or credit card companies will escheat, (3) permitting customers to cash in cards with a balance below $5.00, (4) prohibiting post purchase fees, and (5) extending the required dormancy period from two years to five years. Of these changes, the most significant for many retailers is that New Jersey has now delayed the ZIP code collection requirement and retailers will not have to begin collecting the ZIP code of the purchaser or beneficiary of a gift card until 2016. This delay provides ample time for additional efforts to repeal the law and for the Supreme Court to step in, if they choose. Other provisions become effective far sooner. Namely, gift card issuers will be required to permit customers to cash in cards with a balance of less than $5 as of September 1, 2012 and will be prohibited from charging many post-purchase fees as of December 1, 2012. Gift card issuers are still awaiting the state treasurer’s issuance of guidance for complying with the law.
While all of the New Jersey Senate’s changes help to make the troubled law more acceptable to retailers, they have primarily postponed the major issue, the ZIP code collection requirement, as opposed to fixing it. It remains to be seen how retailers will react if the 2016 date comes and the law has not been repealed. However, many retailers may stay in the state for the time being as a result of these changes and in the hopes that the Supreme Court steps in to rule the ZIP code collection unconstitutional.