Publications

26 Jan 2011

February 1 is compliance deadline:
New Jersey zip code collection requirement for gift cards upheld

FranCast

Scott W. Pink

We reported on the decision of the United States District Court for New Jersey enjoining the "place of purchase" presumption for gift cards created by recent amendments to the New Jersey Unclaimed Property Law in our Francast dated November 18, 2010.

In a setback for gift card issuers, the court issued a ruling on January 14, 2011 clarifying that its earlier order did not apply to the data collection requirements and holding that this provision was not enjoined.  As a result of this ruling, the New Jersey Treasurer has stated that businesses selling gift cards in New Jersey have until February 1, 2011 to implement a system or process capable of recording and maintaining the gift card purchaser's zip code.  

The case centered on subsection 5c of amendments to the New Jersey Unclaimed Property Law that were supposed to take effect on July 1, 2010.  Subjection 5c contained two provisions:(a) the requirement to maintain the record of the zip code of any gift card purchaser in New Jersey; and (b) a presumption that a card is sold to a New Jersey resident and must be reported for escheat purposes if the card is sold from a business located in New Jersey and the issuer does not have the name and address of the purchaser or owner of a gift card.  This presumption was declared unconstitutional and enjoined from being enforced in an order issued on November 13, 2010, because it contravened United States Supreme Court precedent establishing rules of priority for the escheat of abandoned property.  

Following that decision, the New Jersey Treasurer issued an announcement that the zip code collection requirement was still in force.  In response, the plaintiffs filed a motion seeking clarification that the earlier injunction applied to this requirement as well, or in the alternative moving to enjoin the zip code collection requirements on similar grounds as the place of purchase presumption. 

The court denied both motions, holding, among other things, that the zip code collection requirement did not violate Supreme Court priority rules, but rather served the purpose of the first priority rule, which provides the state of residence of the owner of abandoned property has priority to that property.   

Following issuance of the court's ruling, the New Jersey Treasurer issued an announcement notifying issuers that February 1 was the new date for compliance with the zip code collection requirement. There is also a provision by which companies can request the Treasurer to grant them an exemption from these requirements on terms and conditions established by the Treasurer, if such companies are able to demonstrate good cause for the exemption. 

For more information about compliance with this requirement, please contact Scott W. Pink.