Is it possible that gift cards could become extinct in the Garden State? Perhaps, as a looming state law chases away gift card providers.
American Express last week pulled its gift cards from New Jersey drugstores, supermarkets and convenience stores instead of trying to comply with a law that requires retailers to collect the ZIP codes of gift card buyers, according to The Associated Press.
"Because American Express sells its gift cards through third-party independent retail partners, we are not able to ensure compliance with that part of the law," the credit card issuer said in a press statement. "As a result, we cannot conduct any third party sales … of our gift cards in N.J."
As of this week, New Jerseyans only can purchase AmEx gift cards directly from the company.
On Thursday, third-party gift card provider InComm said it's severing ties with the state at the end of June over the same rule, according to another AP report. The company supplies such gift cards as Visa, iTunes, Macy's and Subway to 2,500 retail locations.
The unusual rule is designed to protect consumers from dormancy fees on their gift cards.
If the card goes unused for two years, the state will hold any unused gift card funds for New Jersey consumers, so they won't incur any inactivity fees by the gift card issuer, the N.J. Treasury department said. The consumer can claim the unredeemed funds at any time from the state, plus an unknown amount of interest.
The ZIP code is used to ensure the gift card purchaser is a New Jersey resident and is entitled to the state's protections, says Andy Pratt, a spokesman for the state Treasury department.
The funds will be held in the New Jersey general fund where some of it would be used by the state. A portion would remain on deposit to satisfy claims, Pratt says.
When the law takes effect is still up in the air.
"We're still in talks with all different gift card issuers on how these rules should be written and implemented so the transition goes as smoothly as possible without affecting consumer protections," Pratt says.
The federal government addressed some of the more egregious gift card practices a few years ago under the Credit CARD Act of 2009.
The act stipulated that gift card funds couldn't expire for five years; inactivity fees can be assessed only after a year of non-use; inactivity fees could only be charged once a month; and all fees must be clearly disclosed and explained.
Bankrate's survey last year of gift cards found that only two retailer gift cards out of 55 cards had dormancy or maintenance fees. Seven of the eight network-branded cards featured a dormancy, maintenance or purchase fee.
What do you think of New Jersey's new law? Does it go too far?
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