TRENTON, N.J. — The New Jersey Food Council here won a preliminary injunction this week against the state’s recently passed unclaimed property law that allowed the state to claim revenue from unused gift cards, stored value cards and gift certificates after two years.
Retailers faced an administrative burden if the escheat gift card law was enacted, since it would require retailers to keep records of consumers that purchased SVC cards.
Under the law, if addresses of individuals purchasing cards were unknown, the state assigned ownership to the retailer issuing the cards. The gift card provision also mandated that retailers return to the state unredeemed card balances dating back to 2003.
The lawsuit was filed in federal district court, along with two other suits by American Express and the New Jersey Retail Merchants Association.
New Jersey, like other states in the nation facing major budget deficits, has resorted to such measures as revenue generators. The state faces an estimated budget deficit of about $10 billion in the coming fiscal year, and claimed it could raise $80 million from the law. About half the states in the country have enacted some form of SVC card escheat law, reported the Wall Street Journal in an article last year.
In a press statement, NJFC said while it was pleased with the favorable ruling, the council did not anticipate an end to the case and expected the state to appeal.
Each year Americans spend about $65 billion in gift cards — excluding bank-issued prepaid cards — but don't redeem $6.8 billion, according to research by TowerGroup, a financial-consulting firm.