WEST TRENTON, N.J., April 10, 2012 /PRNewswire/ -- In its April 4, 2012 press release, the New Jersey Treasury Press Office made several statements regarding the new unclaimed property law and its effect on the prepaid and gift card industry. Below are the facts.
Press Office Statement: "...we feel the need to set the record straight and provide additional, factual background on the bipartisan, consumer-friendly initiative passed by the Legislature in 2010. That law created new protections for consumers of gift cards."
- "new protections for consumers" – the provisions regarding no fees and no expiration dates added virtually nothing for consumers, because the vast majority of gift cards, nearly all in fact, already have terms, agreed to by the "giant card issuers" and the card buyers, that provide for access to funds forever, without any dormancy fees. Plus, recent Federal law already provides adequate protection for consumers. The Credit Card Accountability Responsibility and Disclosure Act of 2009 (the "Card Act") already restricts dormancy fees, and prohibits card expiration dates of less than five years from purchase.
- "consumer friendly" – the law requires collecting the name and address or ZIP code of consumers, and then after two years requires that funds be stripped from cards and sent to the state, where consumers must go to obtain the funds from the cards. The result of this requirement is that consumers will not be able to buy cards in thousands of New Jersey stores that used to sell them – hardly consumer friendly to deprive consumers of their ability to give the most asked-for gift.
- Additionally, in response to recent security breaches of financial institutions involving consumer data, consumers are very protective of their personal information and are reluctant to provide it – even ZIP codes. Creating a new source of risk to consumer information is not consumer friendly.
Press Office Statement – "Many gift card issuers and merchants collect ZIP codes – and much more information – at the point of sale. *** Adding ZIP code information is not a big lift."Facts:
- The vast majority of retailers do not collect ZIP codes or other consumer information when gift cards are sold. Thousands of New Jersey stores and their data processors and card providers would have to spend millions of dollars, taking years, to make changes to check-out and back-end systems to collect consumer information in order to give the state the right to obtain unused gift card funds. And then everyone has to be prepared for the slow-down as the data is obtained at check-out.
- No other state in the country has the data collection requirement. Recent announcements, and numerous prior communications to the state, have repeatedly made clear that the system and operational impacts of collecting consumer data have a huge negative impact, so much so that New Jersey gift card sales are being halted.
- New Jersey is the only new state in more than a decade to subject unused gift card funds to escheat requirements. Although a few states still require the turn-over of unused gift card balances, the trend has been to exempt these funds from unclaimed property laws.
- A number of the escheat states also recognize the legitimate interest that retailers have in supporting the costs of gift card programs through realizing their profit margin on purchases made with gift cards. Thus when the opportunity for a sale is lost because funds are sent to the state, those states require that only a portion of unused funds be turned over to the state, with the rest kept to cover retailer costs.
- The fact is most consumers spend their whole gift card in store. Since most gift cards are good forever and their balances don't expire, there is no "grabbing." The card issuers actually prefer that gift cards get spent and as a matter of fact MOST consumers overspend their gift cards, spending more than the amount of their available gift card balance at their local retailers and providing more profit potential from sales than would be earned from unspent funds.
- Reasonable consumers understand the basic terms of a gift card – they know that if they don't redeem the entire gift card, the gift card issuer uses the remaining balance to set off the issuer's costs in manufacturing, distributing, and merchandising those cards, leaving a very small amount available to the issuer, and allows issuers the ability to charge no fees to consumers.
- The additional sales that occur when gift cards are used results in extra sales tax revenue for the state. If the law is not changed, the loss of gift cards in the state may hurt the revenue of the state more than help it. A recent analysis prepared by the electronic payments industry consulting firm First Annapolis ( www.1st-annapolis.com) shows that if gift cards are not available for sale in New Jersey, and gift card overspend is eliminated, state sales tax revenues are estimated to decline by $64 million to $94 million per year. These estimates do not take into account other types of tax revenues which would decline, including corporate income tax.