Gift card marketers are joining forces to oppose a New Jersey law that would cause headaches for retailers.
An organization calling itself Gift Card Users Unite on April 10 issued a statement refuting various recent assertions from New Jersey's treasury department in the wake of certain companies' removal of gift cards from store shelves in the state (
American Express Co. earlier this month began pulling its nonreloadable prepaid gift cards from New Jersey retailers' shelves because of the law, which requires retailers to collect ZIP codes from purchasers at the point of sale (
In an April 4 statement, New Jersey's treasury department sought to tell "the real story" on gift cards (
"If an unredeemed gift card balance is never claimed by a consumer, it is only appropriate that it be made available for the benefit of all New Jerseyans to prevent tax increases and service cutbacks," the state said, adding that approximately 6% of $100 billion in prepaid card funds goes unclaimed each year, "with most of it being retained by the card issuer."
The state asserted that many gift card issuers and merchants already collect ZIP codes "and much more information" at the point of sale, and the process of collecting ZIP codes is "not a big lift" for New Jersey retailers.
The coalition fired back in its statement of its own. It contends that "nearly all" gift cards already have no expiration dates, and consumers have access to those funds forever, with no inactivity fees.
Moreover, most retailers do not already collect information from gift card purchasers at the point of sale, and in the wake of broad data breaches in recent years, "consumers are very protective of their personal information and are reluctant to provide it," the coalition said.
Requiring retailers to collect address and ZIP code data from gift card purchasers would cost merchants "millions of dollars, taking years, to make changes to checkout and back-end systems," and would slow down the checkout process, the group said.
A spokesperson from the coalition was not available for comment.
What is happening in New Jersey in the gift card arena is "a bit of a game of chicken," Ben Jackson, a senior analyst with Mercator Advisory Group, tells PaymentsSource.
Through the coalition, gift card marketers are putting pressure on the state to reconsider the law's implications, "and the next step may be retailers stepping up to say they will not sell prepaid cards in New Jersey," Jackson says.
The gift card industry's goal is to "see some kind of reconciliation or repeal" of the law, he says.
On its website, the gift card industry coalition outlines the law and its repercussions on gift card sales within the state, and urges people to contact state lawmakers to support a bill to reverse the law.
But so far it remains unclear whether a compromise is within sight.
"New Jersey's law introduces various complications, such as whether the need to collect unused funds applies to cards sold in New Jersey that are sent to cardholders out of state and what process would be needed to prove that a gift card was sold in New Jersey in order to collect unused funds from the state," Jackson says.
Mercator research suggests that at least 66% of the value of gift cards sold during the holidays is redeemed within three months of purchase, and for some retailers the redemption rate is as high as 80% or 90%, he says.
"New Jersey's law would make it hard for national retailers to sell gift cards in that state, which could result in lost business for a lot of people,” Jackson says. “It would simply not be efficient for a national gift card retailer to create a separate, complex process like this to sell cards in just one state."
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