Like many states on the hunt to fill in budget shortfalls, New Jersey is getting creative. The state is making a grab for its residents' gift cards.
If you live in New Jersey and wait more than two years to cash in on that Red Lobster gift card that your boss gave you, you'll be out of luck. Under a new state law, New Jersey will take control of funds on gift cards that have not been used for two years. The law could potentially translate into millions of dollars for the Garden State, which would hold the gift card money as "unclaimed funds." That means New Jersey will keep that money in state coffers rather than a consumer being able to access it through the card.
But gift card makers, unwilling to part with so much money in unredeemed funds, are fighting back, pulling out their wares from the state altogether. On Thursday, Blackhawk Network and InComm, the companies behind hundreds of major name-brand gift cards sold through thousands of vendors, said they are pulling their cards from New Jersey vendors starting on June 30 if not sooner. Earlier this week, American Express pulled its cards from New Jersey retailers.
The new law would make card sellers responsible for gathering from buyers certain personal information, such as a ZIP code. That information would then be used by New Jersey to collect the unused money on the cards into the state's unclaimed money fund 24 months after the last time these cards were used.
Procrastinating residents could still obtain any remaining balances on the gift cards by contacting the state's unclaimed funds office.
Under federal law, gift cards must be usable for at least five years after purchase, though most do not have any expiration date. Consumer advocates have criticized gift cards because consumers often forget about them or leave balances unused.
Redemption rates are low for cards and as much as $41 billion in the United States went unspent on all gift cards from 2005 to 2011. In some cases, activation or dormancy fees can eat up small amounts of money left on cards. All these things have made them lucrative for card makers.
InComm claimed that the technology to collect a buyer's information and route it through the multiple channels -- the vendor, the partner brand, the card processor -- does not exist, which makes compliance with the law difficult.
"We have hundreds of card partners and dozens of platforms [for card processors]," Brooks Smith, president and CEO of InComm told The Huffington Post. "It's impossible to bring that data back to the issuer."
New Jersey State Treasury spokesman Andy Pratt said rules about what kind of information would be collected have not yet been established, making the gift card issuers' retreat a surprise for the state. "We have to ask, why is this so important that they get to keep [an] unused balance?"
While the new law is part of the state's attempt to make up for budget shortfalls, Pratt said the amount it would add to the budget would not be known until after June 30, 2013, when the first unused gift card funds would be tapped by the state.
The unused gift cards, travelers' checks and money orders would net $79 million in revenue for New Jersey, according an estimate for the 2011 fiscal year, the Associated Press reported.
So far New Jersey is the only state that is trying to tap unused card balances as a revenue source.
Jennifer Kim, a consumer advocate for the New Jersey Public Interest Research Group, said the additional restrictions --such as handing over personal information at the point of purchase -- will make the cards less consumer friendly, the Associated Press reported.