New Jersey Giftcard Law Is Much More Complicated For Retailers Than Even Its Critics Believe
Written by Frank HayesThe great New Jersey giftcard exodus continues. On April 5, Blackhawk Network and InComm announced they’ll pull their Visa and MasterCard giftcards from New Jersey retailers to avoid a new state law requiring them to collect and store the purchaser’s ZIP code. (American Express giftcards are already gone from the state.) Their complaint: It’s an IT project that’s all cost and no business benefit. But in a merged-channel world, that’s not the only problem with the new law.
In fact, what lawmakers probably thought was a simple idea runs into a buzzsaw of complexities—and the IT project is the easiest part of the problem.
The New Jersey law, which goes live in 2013, requires in-state retailers to collect ZIP codes from all giftcard buyers and for the ZIP codes to be stored by the giftcard vendors, whether they’re located in New Jersey or not. (ZIP codes? They don’t ask “Which Exit?”) If the full value on the giftcard hasn’t been used within two years, the vendors must turn over the unused part to New Jersey, where it can (theoretically) be recouped by the cardholder by contacting the state. Meanwhile, the state gets to hold (and use) the money.
That’s unlike any other state’s laws for unused giftcards, according to National Retail Federation General Counsel Mallory Duncan. “Lots of states have escheatment laws that require businesses to turn over unused card values after some period of time,” Duncan said. “New Jersey goes much further. It requires retailers to keep track of where the giftcards are purchased (by ZIP code), regardless of where the cards are used. Is a giftcard purchased in New Jersey but sent to a recipient in Delaware—where 90 percent of its value is used—really a New Jersey issue? Furthermore, N.J. expedites the escheatment process to such an extent that the excess card value may have to be escheated to the state, in some cases, before the customer had finished using the card.”
Blackhawk and InComm, who pulled the plug on New Jersey cards this week, offer giftcards for Nordstrom, Home Depot, Barnes & Noble, Sears and Starbucks, among other chains.
Let’s leave aside the obvious issues: How does a giftcard recipient know what state the card came from to recoup the card’s value? What’s a chain store to do when the customer complains about a giftcard that had $50 on it yesterday but comes up completely drained today? Who will giftcard recipients blame when the cards come up empty? (OK, we have a definitive answer to that last one: They’ll blame the retailer.)
And let’s even ignore the technical problem of having to modify the POS system.
-Marc
April 12th, 2012 at 8:51 am
A lot of good questions here. However, as I read through NJ’s law, I didn’t see anything that required the merchant to drain the remaining value of the card after 2 years. The merchant will have to pay that amount to the state, but can opt to leave the balance on the card (and should in the name of customer service). If the customer comes back after 2 years and uses the card, then the onus is on the merchant to fill out the form and recoup from NJ.
April 13th, 2012 at 12:59 pm
New Jersey is not as unique as this article makes it sound — at least not with the issues. You mention other states have escheatment laws but imply they don’t have these issues, but they do. I guess this article is focusing on the zip code collection issue, but most, if not all the other issues you mention exist in these other states: What if it bought out-of-state via web, bought out-of-state but picked up in-state, etc.
Texas, Florida, California, and many others have escheatment laws. Now if you really want to get confused and have a craving for bureaucratic red tape, analyze California where they have escheatment laws requiring funds to go to the state within a certain timeframe but also require never-expiring gift cards that merchants must honor forever — all with no fees (assuming certain amount thresholds and other stipulations).