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New Jersey Giftcard Law Is Much More Complicated For Retailers Than Even Its Critics Believe

April 12th, 2012

And let’s even ignore the technical problem of having to modify the part of each in-state retailer’s POS system that’s used for activating giftcards, so it can handle the buyer’s ZIP code. That’s annoying for big chains and a bigger problem for small merchants, but complying with the law is an expense, not a technical impossibility.

The really nasty problems are in the implementation details. An in-state giftcard vendor dealing with cards that could only be used at brick-and-mortar in-state stores? That’s relatively simple. It’s also a situation that doesn’t exist in merged-channel retail reality.

What happens when a New Jersey resident buys a giftcard from a chain’s E-Commerce site—say the customer goes to Target’s Web site and buys a giftcard to mail to an Illinois resident? Does Target have to collect the ZIP code and forward it to New Jersey? What if the giftcard is to be mailed to New Jersey? (American Express has stopped selling giftcards through stores in the state, but said it will still sell them to New Jersey residents online. Presumably AmEx doesn’t think it still has to collect ZIP codes.)

What happens if a giftcard is bought online and issued electronically? What if it’s bought online by a non-New Jersey resident and picked up in-store by a New Jersey resident who’s the recipient of the gift?

What if there’s an E-Commerce kiosk in the store and the giftcard is bought through the Web site that way?

Who’s liable if the person picking up the card lies about not being a New Jersey resident—the customer? The retailer? The card issuer? The difference between a giftcard lasting essentially forever or only two years may make a customer believe it’s worth lying about.

What happens if a chain sells a card (and collects a ZIP code) in New Jersey but stores the ZIP code at the datacenter in California, where privacy laws class ZIP codes as legally protected personal information and collecting or storing them is impermissible in most cases? Is the chain at legal risk?

Will there be a PCI impact? (Isn’t there always?) What if the state decides it needs to audit a retailer’s or vendor’s compliance by matching up Visa- and MasterCard-branded giftcards with account numbers and amounts?

And why are all these questions without answers? Because two years after law was passed, the New Jersey Treasury department hasn’t issued guidelines for how and when ZIP codes do and don’t have to be collected—or exactly how giftcard holders will recoup their two-year-old card’s value if it’s drained by the state.

One state spokesman suggested that the recovery process will involve filling out a state form. Another said last week that cardholders would still be able to use the card, but if New Jersey had already laid claim to the card’s value, the retailer would have to either jump through administrative hoops or eat the loss.

And doesn’t that make you want to sell giftcards in the Garden State?


2 Comments | Read New Jersey Giftcard Law Is Much More Complicated For Retailers Than Even Its Critics Believe

  1. Kevin Thompson Says:

    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.

  2. Steve Sommers Says:

    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).


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