New Jersey's Gift Card Law Requires ZIP Code, Extends Abandonment, Provides 'Cash Back'

New Jersey's Gift Card Law Requires ZIP Code, Extends Abandonment, Provides "Cash Back"

Passed on June 25, 2012 and signed into law on June 29, 2012, Senate Bill 1928 (SB1928) amended New Jersey's unclaimed property law. The law, closely watched by issuers of gift cards, provides a five-year abandonment period, a new "cash-back" provision, prohibition of post-purchase fees and expiration dates, disclosure requirements and the collection of ZIP codes from purchasers. Although the new law was intended to fix some of the infirmities of the old law, the data collection provision appears to have the gift card community gearing up for another challenge.

This alert summarizes SB1928, parts of which will be effective as early as September 1, 2012.

Background

In 2010, Assembly Bill 3002 (AB3002) amended New Jersey's unclaimed property law to provide that unused stored value and gift card balances would escheat after two years' inactivity and to require issuers to collect, at minimum, ZIP code information from purchasers. (To read Venable's January 2011 alert about New Jersey's gift card law, please click here.) SB1928 revises some provisions of AB3002 and adds new requirements.

Summary of Provisions of SB1928

The new law provides for a five-year abandonment period (a change from two years in AB3002) before unused balances from gift cards escheat; a previous version of the bill, passed by the Senate Budget Committee in May, would have taken away the state's ability to seize gift cards, but the provision was watered down by the Senate so that it simply extended the abandonment period. Only 60 percent of the abandoned card's value will escheat.

A new provision was also introduced that permits customers to cash in cards with a balance of less than $5.00, effective September 1, 2012. The law does not require sellers to affirmatively inform customers of the right to request a refund. This "cash-back" provision is important; a number of major gift card sellers have been required to pay large fines in other states for failing to comply with similar laws. Indeed, in 2009, Starbucks was required to pay $225,000 in civil penalties, costs and restitution to three Northern California district attorneys and post signs informing customers about their right to a refund, and was required to modify its cash register system to provide for an auto-refund capability.

The new law also provides that post-purchase fees are prohibited for cards sold on or after December 1...