American Express, others yank gift cards from New Jersey
Law gives state unclaimed money, requires retailers to gather buyers' ZIP codes
By Aundraya Ruse | Published: April 10, 2012
A fight has erupted in New Jersey over who should be able to hold onto unclaimed gift card money, and American Express and other companies say they're pulling their cards from retail distribution in the state as a result.
At stake is about $70 million a year in unused gift card money in New Jersey. That's how much is spent annually on Garden State gift cards that end up lying unused in drawers and wallets, forgotten. Previously, if someone in New Jersey bought and forgot a gift card, the money spent on it reverted to the card issuer. In 2010, the state passed a law requiring gift card retailers to get the ZIP codes of card buyers. The law says that if the ZIP code is in New Jersey, the state could claim unused funds after two years of card inactivity.
An injunction had prevented the law from going into effect, but it recently was lifted. That brought the issue to a head, and now the state and gift card issuers are each arguing they are the most trustworthy steward of consumers' unspent gift card money.
American Express fired the opening salvo, becoming the first of three companies to announce it would discontinue selling gift cards in that state. AmEx spokeswoman Vanessa McCutchen told The Associated Press that the company retails its cards through other sellers, and it could not guarantee these third parties would comply with the law.
Atlanta-based InComm announced that it, too, will cut its gift card ties with New Jersey. InComm's gift card mall program includes locations such as iTunes, Chili's and Macy's.
Brooks Smith, InComm's president and CEO of InComm, says New Jersey consumers are being shortchanged.
"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," Smith says. "States should not have the right to remove funds from an unexpired gift card."
Additionally, gift card retailer Blackhawk Network announced that it plans to end sales of gift and prepaid cards in New Jersey as of June 30, 2012. Talbott Roche, the president of the Pleasanton, Calif. company, says that it would increase costs for its third-party retailers, jeopardize consumer privacy and possibly slow down the consumer checkout process.
"As it stands now, Blackhawk Network and its retail partners do not have a cost-effective way to record data from gift card purchasers or their ultimate gift recipients," Roche says. "In addition, gift cards sold through Blackhawk Network's program do not have expiration dates or dormancy fees, which means that consumers already have the right to the funds on their cards -- forever."
State fires back
Saying its position has been "falsely portrayed," the Department of the Treasury of New Jersey released a sharp retort, saying that the law actually protects consumers, and suggests the big card companies are the ones doing a money grab.
"The law also provides that unused balances be transferred to the state after two years of inactivity, rather than taken by the card issuer as windfall profits," the statement says. "But most critically: Unlike balances taken as extra 'profit' by an issuer, every penny the state holds in unused gift cads can be reclaimed by consumers -- forever. And the value of the card is available to the customer -- with interest -- forever." New Jersey Treasury Department representatives also say the state is not imposing an unreasonable burden on business operations -- that collecting a ZIP code is not a big deal.
The statement notes that nationally, about 6 percent of the $1 trillion in annual gift card sales -- $6 billion -- go unused each year.
While New Jersey's ZIP code requirement may be unique, its claim on unused gift card money is not. A growing number of states have passed laws laying claim to those funds, including Nebraska, Illinois, Connecticut and Massachusetts.
Of course, the wisest course for consumers is to spend their gift card money so it doesn't fall into anyone else's hands.
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