If you live in New Jersey, next time someone gives you a gift card be sure you don`t misplace it and forget about it. Saving it for a rainy day might seem like a good idea, but if you don`t use it within two years, the state thinks it needs the money more than you do.
The Treasury Department of New Jersey has instituted changes to its unclaimed property law and will soon require sellers of gift cards to track the ZIP codes of anyone who purchases a gift card. This way, they say they can seize any unclaimed value on gift cards more than two years old.
The Last Five Letters in “Escheat” are “Cheat”
Many states have what are known as “escheat” laws – a term that refers to common law doctrine that allows the unclaimed property of the deceased to be taken by the state. In fact, 26 states can take property after three years of inactivity. However, New Jersey is first state to attempt to collect personal information from gift card buyers, in order to facilitate their claiming of potentially unused funds.
American Express and the Retail Merchants Association have filed a lawsuit to prevent the practice, saying that the law will place undue burden on businesses. John Holub, president of the New Jersey Retail Merchants Association, says “Retailers and gift card issuers like American Express have had serious concerns about the escheat law since it was passed nearly two years ago.”
American Express has pulled its gift cards from New Jersey retailers rather than complying with the law, and now InComm, which issues gift cards from iTunes, Macy`s, Starbucks, and hundreds of others, has followed their lead and pulled their cards as well. Blackhawk Network, which issues Barnes and Noble, Home Depot, and Sears gift cards, along with many others, also will no longer sell gift cards in New Jersey.
“The legal risk, technological burden and steep cost of complying [with the new law] is simply too great,” said Holub.
InComm also issues Visa prepaid cards, under the Vanilla Visa® Gift Card and Vanilla MasterCard® Gift Card brands, and they will no longer offer these cards for sale in New Jersey, either.
New Jersey Bites Back
Andy Pratt, Treasury Department spokesman, said that the policy is not yet set in stone. “We`re working with industry groups to determine the best way to have merchants collect ZIP codes,” Pratt said. “We’re not requiring it until we come up with a policy that is uniform and as least onerous as possible.”
The state put nearly $80 million in unclaimed property in its coffers in 2011, and looks at unused gift cards (as well as traveler’s checks and money orders) as potential profit. Before the escheat laws, profit from unused gift cards stay in the pocket of the issuing merchant.
With somewhere between four and sixteen percent of gift cards never being redeemed, according to two studies by Nielson and Providence College, it must be tempting for the state to want a piece of the unclaimed pie. But should they really have any stake in the claim? If you buy an iTunes gift card for your teenaged nephew and he inadvertently buries it underneath a pile of dirty socks for two years, should the state have a right to that money?
But What Will We Get for Cousin Sophie?
Whether or not people spend the balances on their gift cards may become a moot point if customers in New Jersey are no longer able to buy gift cards at all. With Blackhawk, American Express, and InComm all pulling their products from retail racks, it will be harder to buy a gift card as a last minute present.
Brooks Smith, president and CEO of InComm, said “In addition to the compliance issues this law creates, we are very concerned that our New Jersey consumers will not have continued access to their gift card funds. States should not have the right to remove funds from an unexpired gift card.”
A survey of about 700 New Jersey residents showed that 94.3% of them don’t want to lose the ability to purchase gift cards in the state, and 90.9% of them don`t want to provide personal information when buying gift cards.