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Tuesday, April 3, 2012

AmEx pulls gift cards out of N.J.

As a consequence of a New Jersey law that allows the state to seize funds from unused gift cards, American Express Co. removed all of its network-branded gift cards from the J-hooks and displays of retailers in the Garden State. AmEx said it took the unprecedented step because it could not comply with the law's ZIP code collection mandate, where retailers have to collect the ZIP codes of customers who purchase AmEx-branded gift cards at the POS.

New Jersey is using the ZIP code collection requirement as a way to establish the basis for staking a claim to money that lies dormant on unused gift cards purchased in New Jersey. The requirement is part of New Jersey's unclaimed property law, which was updated in 2010 to include gift cards. Legal wrangling over the law, with a lawsuit involving AmEx, resulted in the striking down of many requirements of the law, but the ZIP code collection mandate remains.

"Because American Express sells its gift cards through third-party independent retail partners, we are not able to ensure compliance with that part of the law," said Vanessa McCutchen, spokeswoman at AmEx. "As a result, we cannot conduct any third-party sales, such as those through retail locations, financial institutions, and third-party selling websites, of our gift cards in [New Jersey]."

McCutchen added that consumers in New Jersey can still purchase AmEx gift cards online at the card brand's website and its gift cards will continue to be accepted at retail locations throughout New Jersey where the brand is accepted.

Rollback underway

Legislation is working its way through the New Jersey legislature to repeal the gift card provisions of the law. In March 2012, the New Jersey Assembly passed a bill that would remove certain types of stored-value (gift) cards from the list of instruments covered under the law.

A1871, sponsored by Democratic Assemblymen Patrick J. Diegnan Jr., Paul D. Moriarty and Gordon M. Johnson, would not only remove gift cards from the ranks of escheatable property, but eliminate any gift cards sold in New Jersey from having expiration dates, thus allowing cardholders access to gift card funds into perpetuity.

Diegnan said the updated law has caused "a significant amount of uncertainty for consumers and businesses alike." Johnson added, "We should be promoting businesses and protecting consumers, not going after them, especially in this difficult economy." Moriarty characterized the bill as restoring "sanity to the system" and protecting consumers' rights to unclaimed property.

The U.K.-based Global Prepaid Exchange reported that a social media campaign called "Gift Card Users Unite" has arisen on Facebook. The goal of the campaign is to inform New Jersey citizens of the controversy and push for a more consumer and business friendly solution to the issue.

Setting an unsettling precedent

The 3,500 member New Jersey Retail Merchants Association, in tandem with AmEx and the New Jersey Food Council, sued New Jersey over the unclaimed property law. They argued, among other things, that the reporting requirements on gift card purchases stipulated by the law would be too time consuming and costly to implement, and would result in providers and retailers eliminating gift card programs in New Jersey.

John Holub, President of the NJRMA, said the law makes New Jersey "the most unfriendly state in the country for gift cards," and added, "It's not only anti-business, it's anti-consumer at the same time."

Holub said the New Jersey law was solely a revenue generating initiative for the state. He fears the law, if it stands, will set a precedent for other state governments to follow. "Other states are still struggling with their budgets," he said. "And we certainly don't want anyone else to think this is a good idea and one where they can potentially raise some money."

Holub is optimistic New Jersey can repeal the gift card provisions of the law. He anticipates a companion bill to the Assembly bill will be introduced in the New Jersey Senate this May, when the legislature returns from a budget break. In the meantime, the NJRMA is in ongoing discussions with the administration of New Jersey Gov. Chris Christie to arrive at a solution. "We're hopeful this is going to be resolved sooner than May," Holub said. end of article

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