S1962, sponsored by Sen. Shirley K. Turner, D-District 15, would thus eliminate the provision that New Jersey retailers obtain ZIP codes from gift card buyers. That provision of the law prompted card brand American Express Co. to remove its network-branded gift cards from the stores of New Jersey retailers. Prepaid card distributors InComm and Blackhawk Network announced similar plans.
The updated abandoned property law has not yet been implemented as legal challenges have kept it tied up in the courts. The New Jersey Retail Merchants Association and the Retail Gift Card Association jointly released analysis conducted by First Annapolis Consulting that estimated the potential annual loss of sales tax revenue to the state due to the abandoned property law would be between $64 million and $94 million.
"As gift cards exit New Jersey, this incremental spending is eliminated from the market, lowering total retail sales in New Jersey," the associations said. "Any decrease in New Jersey's retail sales would also result in a decrease in the state's sales and use-tax revenue."
New Jersey updated its abandoned property provisions in June 2010, when A3002 was signed into law by Republican Governor Chris Christie. The law included, for the first time, the leftover balances on unused gift cards as among the types of abandoned property that New Jersey could seize for state coffers. It was estimated that the Garden State could collect up to $55 million annually in unused gift card funds.
But gift card advocates and merchants mounted legal challenges to the new law, arguing 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.
In the New Jersey Assembly, a bill similar to S1962 is working its way through the house. A1871, sponsored by three Democratic assemblymen, 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. The New Jersey lawmakers said the updated law had caused uncertainty for businesses and consumers and that A1871 would alleviate that uncertainty.
The State of New Jersey Department of the Treasury said AmEx and the distributors are engaging in a misinformation campaign. "The large card companies would have you believe that the state is 'grabbing' or 'taxing' gift cards," the Treasury said in a statement. The office characterized the card companies' actions as an attempt to "protect giant card issuers' anti-consumer business practices and unjustifiable profit-grabs from abandoned or forgotten gift cards."
The Treasury said the updated law provides "long-overdue protections to buyers of gift cards by preventing gift card issuers from depleting and then taking consumers' unused balances" and prevents gift card sellers from charging "exorbitant 'inactivity' or 'dormancy' fees that deplete and ultimately eliminate the value of cards over time."
The Treasury also stated that, under the new law, unused gift card funds transferred to the state after two years of inactivity actually help consumers. "Unlike balances taken as extra 'profit' by an issuer, every penny the state holds in unused gift cards can be reclaimed by consumers – forever," the department said. "And the value of the card is available to the customer – with interest – forever."
The office added that the law helps the state of New Jersey, saying, "[I]f an unredeemed gift card balance is never claimed by a consumer, it is only appropriate that it be made available for the benefit of all New Jerseyans to prevent tax increases and service cutbacks."
John Holub, President of the NJRMA, believes a version of S1962 stands a better chance than A1871 of being signed into law by Gov. Christie, since the former bill is more narrowly focused on gift cards, while the latter legislation also deals with unused travelers' checks and money orders.
Holub said giftcardusersunite.com, a website that informs New Jersey consumers of the unclaimed property law controversy, is having the desired effect, as the state's residents see that gift cards will be available in neighboring states, but not in New Jersey. "Consumers are starting to recognize the effect [the law] will have on them," he said.
Holub added that the New Jersey associations continue to communicate with the state's administration to try and reach a resolution to the issue. He said the administration can quickly resolve the problem by issuing exemptions from the law for gift card providers. Holub's fear is that if the law is enacted as it stands, it could have a negative "domino effect" on other states and further reduce the availability of gift cards to consumers.
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