Gift Card Blog - ScripSmart

InComm Plans To Stop Selling Gift Cards In New Jersey

A couple of days ago I wrote about American Express choosing to stop selling gift cards in New Jersey, a reaction to recent changes in New Jersey gift card law. I also mentioned others might follow suit and today another major player in the gift card industry announced plans to stop selling gift cards in the state of New Jersey: InComm.

InComm issues two of the higher scoring bank-issued gift cards rated by ScripSmart: the Vanilla Visa Gift Card and Vanilla MasterCard gift card. The company will stop selling gift cards in New Jersey by June 30, 2012.

Importantly, InComm also operates several "gift card malls" kiosks often located in grocery stores, convenience stores and gas stations. In short, they help companies like CVS Pharmacy sell gift cards on behalf of other merchants. For example, if you want to buy an Amazon Gift Card, you can visit your local convenience store and pick one up along with a plethora of other options. By removing many of these gift card malls it will certainly put the changes to New Jersey's laws on their radar of more New Jersey consumers.

According to the InComm's press release, the company "...is unable on behalf of its third-party gift card partners to ensure compliance with this law." In other words, they can't ensure the clerk at your local convenience store will be able to capture zip codes from buyers. While I don't believe it's not possible to enforce such a practice (they could suspend sales until the systems are ready), it is something which would not even be helpful in determining the true location of a gift cardholder because the person who buys a gift card (and give their zip code) often gives it to another person (who has another zip code).

For the record, ScripSmart is against gift cards being considered unclaimed property and make no mistake about it: consumers are the ones who will loose out as a result of the changes in New Jersey's laws. These moves by gift card issuers are will preventing the state of New Jersey from seizing gift card funds (after a mere two years of inactivity), make a statement to consumers who buy gift cards and set a precedent for other states who may be considering similar legislation.

Believe it or not, New Jersey lawmakers who sponsored the bill actually claim this is an effort to protect consumers, but it's really about "free" money for the state. But we all know there isn't any such thing as free money and in this case it comes at the expense of consumers and businesses.

This is simply a step in the wrong direction for consumer protection when it comes to gift cards and it seems likely InComm and American Express will not be the only ones to leave New Jersey.

Update 04/05/2012: Blackhawk Network another major provider of gift card malls has announced they will stop selling gift card in New Jersey unless the law is revised.

American Express Gift Cards No Longer Sold In New Jersey

It looks like the American Express Gift Card is no longer an option for consumers in New Jersey. According to NorthNewJersey.com, American Express began removing it's gift cards from store shelves several weeks ago and the last one was removed yesterday.

It's all the result of recent changes to New Jersey Gift Card Laws, which require merchants to hand over the value of unused gift cards to the State of New Jersey after two years. The law also requires merchants to collect the zip code of a gift card purchaser to help the state determine the location of the potentially abandoned property.

It's not surprising American Express is first to move on this front, the company already avoids Hawaii and Vermont when selling gift cards. If more merchants follow, it will certainly cause a stir. 

Administrative Nightmare or Proof of Consumer Protection

Opponents of the new laws suggest collecting zip codes from buyers is an onerous task requiring expensive upgrades to their systems. Furthermore, selling gift cards at third party locations such as a grocery store makes compliance even more difficult to enforce for card issuers. As a result, they would prefer to avoid selling in the state altogether.

Proponents of the new law suggest American Expresses' willingness to pull out of the market entirely is proof the majority of the revenue generated by such gift card programs is the result of unused gift cards and reason why such laws are needed.

Either way, consumers are loosing out. However, one Assemblyman believes the new laws are protecting consumers. Assemblyman Declan J. O'Scanlon Jr. (R-Monmouth County), is quoted saying:

"New Jersey doesn’t steal people’s money...In fact it’s consumers we are protecting."

Mr. O'Scanlon was a sponsor of the new gift card laws and he's simply wrong. When unclaimed property laws are applied to gift cards it hardly helps consumers. Here are a few reasons why:

• Only a sliver of the money collected from unused gift cards will end up back in the consumer's hands. One article pegged the number at just 22 cents for every $1,000 seized. That's hardly a help to consumers.

• Gift cards are purchased and given to other people. Therefore, the location of the gift cardholder is often unknown. Many of the gift cards New Jersey collects will belong to gift cardholders who reside in another state.

• The state of New Jersey is essentially expiring the gift card after two years. While a consumer could get the money from the state, they won't be able to redeem the gift card with the merchant as it was intended. 

I'm a proponent of protecting consumers when it comes to gift cards and if New Jersey were really serious about gift card consumer protection they would pass laws which prohibit expiration dates, fees and require merchants to offer cash back for gift cards which have been used at least once and have a balance of $5 or less.

At the very least, New Jersey should take a page from Texas Gift Card Law and exclude gift cards with no fees or expiration date from unclaimed property law.