11/16/10 UPDATE: The New Jersey Law Journal reports that a federal judge has issued an injunction blocking the state from taking possession of unused gift card fund.
It's amazing how fast the government can move when they need your money.
Case And Point: New Jersey
The State of New Jersey is in dire financial condition and to help bridge the gap, it's enacted some changes to their unclaimed property law. In short, gift cards which have been inactive for two years are now considered abandoned property. Businesses who issue such gift cards are required to turn the money over to the state.
Assembly Bill No. 3002 was signed into law on June 30, 2010 and was effective the very next day. The new law is also retroactive, impacting any gift card issued which has also been inactive for two or more years.
It's worth noting, this Bill was sponsored by:
DECLAN J. O'SCANLON, JR. - District 12 (Mercer and Monmouth) - Phone: (732) 933-1591
AMY H. HANDLIN - District 13 (Middlesex and Monmouth) - Phone: (732) 787-1170
and co-sponsored by:
Senator Anthony R. Bucco
Our Stance On Gift Cards And Unclaimed Property
ScripSmart's grading system looks down on states which take it upon themselves to include gift cards as unclaimed property. It's no surprise New Jersey Gift Card Law receives an F for consumer gift card protection.
We believe defining gift cards as unclaimed property makes gift cards more complicated for both consumers and businesses. It also gives gift card issuers a reason to impose fees and expiration dates, if permitted by state and federal law.
At the very least, there should be an exception for gift cards which do not charge post sale fees and have no expiration date. It's one of the things we like about Texas Gift Card Law. While Texas does not limit fees for expiration dates in anyway, they recognize a business should be able to issue a consumer friendly gift card without the state punishing them.
Not Just New Jersey Consumers Will Be Affected
Most companies do not know the location of the current gift card holder. The last address they have on file is typically the purchaser. However, the nature of gift cards is such that the purchaser is rarely the holder of the property. As such, the State of New Jersey will consider many gift cards to be unclaimed property when the true gift card holder lives in another state.
For example, your Sister-in-law who lives in New Jersey buys a no expiration gift card and personally mails it to your home in California. The last known address for the gift card will be in New Jersey (where she bought the card). If you forget about the gift card and it's been inactive for two years, the business will follow New Jersey's law and turn the funds over to the State of New Jersey. At that point it's possible the gift card will not be accepted for payment by the card issuer. In effect the gift card has expired, and the card holder must go to the state for reimbursement of the funds.
Last week we reviewed the Ticketmaster Gift Card; it received a great Gift Card Score™. While reviewing the terms, a section caught our attention:
6. Expiration Dates.
The Gift Card has no expiration date. However, in certain states, after a certain period of time, we may remit the cash associated with unused Gift Card balances to certain states pursuant to their abandoned property laws. Once we have remitted that cash to such a state, if someone tries to redeem the Gift Card, it may no longer be redeemed and we may direct them to that state's government instead.
In other words, a state like New Jersey is effectively expiring gift cards. While I believe Ticketmaster should take the high road and accept the gift card as payment and then go to the state for reimbursement; I understand why such a policy would exist. Currently, a Gift Card Score in not adversely effected by a policy such as Ticketmaster's and I don't believe it should be any lower.
At the end of the day it's clear the state of New Jersey is desperate for money. The fact that these changes took effect so fast and are retroactive, reeks of desperation.
However, the Bill states other motivations:
"The primary purposes of this measure are to protect New Jersey consumers from certain commercial dormancy fee practices and modernize the State’s unclaimed property laws."
Let's be honest, modernizing unclaimed property law for gift cards has two components:
1) Define the notion of a gift card in unclaimed property law.
2) Specifically stating gift cards are not considered unclaimed property.
Here is a quick summary of each state's stance on whether or not gift cards are seen as unclaimed property.
But The New Federal Gift Card Law?
Later this month, new federal gift card law goes into effect. One aspect of this law is a minimum expiration date of 5 years. New Jersey has put business owners in a tough place: they are going to have to turn gift cards over to the state before the minimum expiration date allowable under federal law. It's just unfair and not in the interest of consumer protection.