As discussed in previous articles, New Jersey amended its unclaimed property law in 2010. The amended law applied to stored value cards issued on and after July 1, 2010 and retroactively to those that were issued prior to July 1, 2010 and remain outstanding as of July 1, 2010. Furthermore, the applicable stored value cards were to be presumed abandoned after two years of inactivity. Upon abandonment, the value remaining on the stored value card would escheat to the state. The amended law also contained a "place of presumption" requirement which requires issuers of gift cards and stored value cards to escheat unused funds remaining on such cards after two years on inactivity if the card was purchased in New Jersey and the issuer does not know the purchaser's address.
In an ongoing lawsuit, several merchant associations have argued that such a "place of presumption" requirement would contradict the United States Supreme Court's previous ruling that funds escheat to the state of the purchaser's last known address, or if the purchaser's address is unknown, funds escheat to the issuer's state of domicile (if required by that state). In a recent decision, the Third Circuit Court of Appeals temporarily enjoined enforcement of the "place of presumption law" of New Jersey's amended escheat law. The court further enjoined the retroactive application of the law to stored value cards redeemable solely for merchandise or services which were issued prior to effective date of the amendment. Notably, stored value cards redeemable for cash issued prior to the effective date of the amendment continue to be subject to the law, as well as all stored value cards issued after the effective date.
New Jersey's amended law also requires that issuers of gift cards or stored value cards collect the purchaser's name and address at the time or purchase, or at a minimum the purchaser's ZIP code. This portion of the law was not enjoined and can be enforced by state authorities. However, issuers should be aware that some states may prohibit the collection of a consumer ZIP code or other personal information at the time of purchase. For example, California's Song-Beverly act has been found to prohibit the collection of consumers' ZIP codes and email address in connection with credit card transactions.
Under the New Jersey law, funds are not required to be escheated if the card was distributed pursuant to a promotional or customer loyalty promotion or a charitable program where no monetary or other consideration was provided in exchange for the card.
TIP: Although it is unclear when the New Jersey Treasurer's office will begin enforcement, retailers and advertisers that sell gift cards in New Jersey or to New Jersey residents are now required to escheat unused funds remaining of such cards and are required to collect, at a minimum, the purchaser's ZIP code at the time of purchase.
Monique N. Bhargava
; Brian D. Fergemann