02.01.2011
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Updates
On January 31, 2011, the U.S. Court of Appeals for the Third Circuit issued a temporary injunction against New Jersey’s requirement that stored value card issuers obtain and maintain a record of the zip code of each stored value card purchaser. The zip-code collection requirement was to take effect on February 1, 2011. As a result, issuers of stored value cards (including gift cards and gift certificates) currently do not have to collect zip-code data from New Jersey purchasers. However, issuers should be prepared to collect zip codes or cease selling stored value card in New Jersey at least until the Third Circuit ultimately decides the matter. The temporary injunction comes on the heels of a January 14, 2011 district court opinion denying a similar motion for injunctive relief, and review by a full panel of the Third Circuit is pending.
New Jersey Deadline for Recording and Maintaining Stored Value Card Information
01.28.2011
On June 29, 2010, New Jersey enacted Assembly Bill 3002, which substantially revised the
state’s unclaimed property laws.1 Many of these revisions directly impact issuers of “stored
value cards,” which broadly includes paper gift certificates, gift cards, rebate cards, and other products.2 This Update discusses AB 3002’s requirement to collect consumer names, addresses and zip codes and the abandonment period for stored value cards.
While legal challenges to the validity of the third priority rule and the retroactive application of the unclaimed property law to previously issued stored value cards are still ongoing, issuers should ensure that they either immediately comply with AB 3002’s requirements or cease selling stored value cards directly or indirectly to New Jersey consumers or businesses.
Name and Address Collection Requirement – Effective February 1, 2011
- Requirement. In New Jersey, an “issuer” of stored value cards is required to collect and maintain, at a minimum, the zip code of the owner or purchaser of cards issued or sold in New Jersey. Also, the issuer must collect the name and address of the owner or purchaser of a stored value card (a) if the issuer already does so in the ordinary course of its business or (b) if the issuer requires registration of the card by the owner or purchaser before initial use, in which case the name and address must be obtained at that time and maintained by the issuer.3
- Applicability.
- Issuers. The name and address collection requirement applies to an “issuer” of a stored value card. The “issuer” is the entity that is obligated to accept and redeem the stored value card and to report and remit unclaimed card funds to the state.4 Issuers that sell cards to a reseller or distributor (with a transfer of ownership of the cards to the reseller or distributor) likely will need to record the address information of the reseller or distributor as the owner of the cards. However, issuers that sell cards to consumers through card distribution and activation networks (such as gift card mall kiosks) may need to ensure that they are obtaining at least zip code information through their networks for all stored value card sales in New Jersey, and thus should discuss this with their networks. Notably, issuers that sell cards via the Internet or mail order to New Jersey consumers also likely will need to comply.
- Resellers. A reseller or distributor that purchases stored value cards from an issuer (with a transfer of ownership of the cards to the reseller or distributor) and resells them to consumers or subsequent resellers likely should not be required to collect names and addresses, provided it is not obligated to accept and redeem the cards.
- Retailers in card activation networks. Retailers that activate and sell third party stored value cards on behalf of issuers and a card distribution and activation network (e.g., retailers with a gift card mall kiosk for cards activated at point-of-sale) may find that the network will require them to either collect zip code information from consumers for each sale of a stored value card or cease activating cards in New Jersey.
- Compliance Deadline. On January 3, 2011, The New Jersey Treasurer extended the compliance deadline for zip code collection. Any issuer “who does not have a system or process capable of recording and maintaining the purchaser’s zip code will have until February 1, 2011 to install and implement a system or process that meets this requirement.”5
Abandonment Period
- A stored value card is presumed abandoned after 2 years of inactivity.6 The amount presumed abandoned is the value of the card, in money, on the date presumed abandoned.7
- AB 3002 provided that it applies retroactively even to stored value cards issued before July 1, 2010, the date AB 3002 took effect. Due to a preliminary injunction, however, the requirement to report and remit unclaimed property statute currently applies only to cards issued on or after July 1, 2010 (see discussion below). Notably, New Jersey ordinarily has a 5 year reach-back period. Thus, if the injunction is lifted, a holder’s 2011 unclaimed property report (due before November 1), for example, would include stored value cards issued beginning July 1, 2004 with a last activity date on or before June 30, 2009.
Penalties
- Failing to collect names, addresses or zip codes or perform other duties imposed by the unclaimed property statute is subject to a penalty of $200 per day, up to a maximum of
$100,000.8 - Failing to report and pay abandoned property on time is subject to a $200 daily penalty, up to $100,000, as well as interest at a rate of 10% above the U.S. T-Bill rate.9 If the violation is willful, penalties can increase to $1,000 per day, up to $250,000, plus 25% of the unreported amount.10 Notably, on November 13, 2010, a federal court preliminarily enjoined New Jersey from (a) claiming abandoned property merely on the basis the property was sold in the state (i.e., the “third priority rule”) and (b) retroactively requiring the reporting of cards redeemable solely for merchandise or services that were issued before July 1, 2010.11 As such, such penalties and interest arguably do not apply to stored value cards sold in New Jersey if the issuer has no address records of the card owners (though this may trigger the penalty described above) and the issuer is not incorporated in New Jersey. Stored value card issuers should monitor this and related cases for further developments
1 Published as P.L. 2010, ch. 25. AB 3002 is codified at N.J. Rev. Stat. 46:30B-6 et seq.
2 Certain smaller stored value card programs ($250,000 or less per year) and promotional or charitable programs can be exempt from the unclaimed property statute. N.J. Rev.
Stat. 46:30B-42.1(e).
3 The New Jersey Treasurer has limited the broader information collection requirement specified in the statute. Treasury Announcement FY 2011-03 (Sept. 23, 2010).
4 N.J. Rev. Stat. 46:30B-42.1(h).
5 Treasury Announcement FY 2011-07 (Jan. 3, 2011).
6 N.J. Rev. Stat. 46:30B-42.1(a).
7 N.J. Rev. Stat. 46:30B-42.1(b).
10 N.J. Rev. Stat. 46:30B-105.
11 American Express Travel Related Services Co. v. Sidamon-Eristoff, 2010 WL 4722209 (D.N.J. Nov. 13, 2010).
© 2011 Perkins Coie LLP
