TRENTON, N.J. - New Jersey will soon begin requiring gift card sellers to obtain ZIP codes from buyers so it can claim the value of cards not redeemed after two years. At least one major seller, American Express, has pulled its cards from shelves rather than attempt to comply.
Shoppers would still be able to redeem a card after two years, if it hasn’t expired. But if the state has already laid claim to the money, businesses might have to jump through administrative hoops to get reimbursement - and therefore stop selling gift cards altogether to avoid the hassle.
“No other state in the country requires this of retailers,’’ said John Holub, president of the New Jersey Retail Merchants Association, which represents 3,500 retailers and is one of three groups to sue over the law. “The loser is going to be the consumer, because gift cards from some of their favorite retailers may no longer be available.’’
There is no way American Express Co. can ensure compliance with cards not bought directly from AmEx, company spokeswoman Vanessa McCutchen said. The company began pulling gift cards in New Jersey last week.
By Monday, there were none left at groceries, pharmacies, or convenience stores in the state. The only way for New Jersey residents to buy AmEx gift cards, which can be used practically anywhere, is directly from the company.
The state saw unused gift cards, travelers’ checks, and money orders as potential new revenue sources and projected the state could get $79 million in fiscal 2011. Without information about the consumer, the value of the unused card would belong to the company.
The Legislature passed the law along with the budget two years ago. Lawsuits quickly followed, and the collection of ZIP codes was temporarily suspended.
The merits of the cases, since consolidated into one, have yet to be argued. But the injunction has been lifted, paving the way for the state Treasury Department to issue guidance on new ZIP code collection requirements.
The Assembly passed a proposal in March to reverse the changes, but the Senate has so far not acted.
Retailers may have to decide whether to spend the time and money to upgrade their point-of-purchase sales system so that a ZIP code can be attached to a transaction for later tracking, said Jim Burns, a Newark lawyer whose firm is representing the Retail Merchants Association.
“The law has put retailers at the precipice of some troubling decisions,’’ Burns said.
Consumer advocate Jennifer Kim of the New Jersey Public Interest Research Group said she is also worried about the state adding a restriction that could make gift cards less consumer-friendly.
“Our concern is whether there will be adequate disclosure ahead of time, that consumers and buyers will know up front what the rules are so they don’t get taken advantage of,’’ Kim said.