New Jersey Taking “Unused” Gift Card Balances After Two Years

Keep that gift card in your wallet too long and the government may come for it.

A law that was passed in New Jersey two years ago, but is only going into effect now due in part to legal challenges, is threatening to do serious damage to the gift card industry in the Garden State:

Pursuant to a law passed two years ago, the New Jersey Department of the Treasury will soon compel sellers to obtain the ZIP code of every buyer of a gift card in order to enable the state to expropriate the value of the unused card as “unclaimed property” after two years.  The  law also applies to unused travelers’ checks and money orders in addition to gift cards

In 2011  the state seized $79 million of such “unclaimed property”  under the law.  There was huge outcry and a lawsuit quickly followed that resulted in an injunction against the collection of ZIP codes.  But this injunction has just been lifted, although the case has not yet been resolved.  American Express has responded by pulling its gift cards from pharmacies, supermarkets and convenience stores.  Two third-party providers of  gift cards to malls, convenience stores and grocery stores, Blackhawk Network and InComm, have followed Amex’s lead and announced that they will stop doing business in New Jersey in June.  The reason is that it is impossible to ensure compliance with the ZIP code mandate when the cards are sold by other parties.

This isn’t a provision of law that’s unique to New Jersey. According to this website, 27 states have provisions that in their unclaimed property laws that apply to gift cards, cash balance cards, and gift certificates. In most states, though, the definition of what is subject to the state’s escheat laws is far more limited than the broad definition that New Jersey appears to be using. Additionally, the perdod of time that must pass before which the balance on a card is considered abandoned is longer than the two years that New Jersey’s law allows, most states allow three years to pass before the balance is considered abandoned and some allow as many as five years to pass.

That last point points out what may be one of the most unreasonable thing about the law. The fact that the some portion of the  balance on, say, an American Express Gift Card, remains unused after only two years is hardly a reliable sign that it has been willfully abandoned by the owner of the card. It may just be that they’ve decided to hold on to the card for use only in an emergency, or that this was a card that was given to a college student as an “emergency fund” when they started school. If the balance remains unused after five years, you could perhaps make a reasonable argument that the property has been abandoned. Two years? Sorry New Jersey, you’re being just a little too eager to get other people’s money there.

The other problem with the law is the bookkeeping headache it creates for business owners all across the state. These “co-branded” gift cards are sold in any number of retailers from grocery stores, to pharmacies, to smaller convenience stores that maybe allow a small kiosk in their store as a way to generate more income. With the injunction mentioned in the above-quoted text now lifted, all of these retailers would be required to start keeping note of the Zip Code of each person who buys one of the gift cards, and reporting the same to state even though they have no way of knowing if the information provided by the customer is accurate. Of course, the more likely outcome is that the gift card providers will simply follow the lead of Amex, Blackhawk, and InComm and stop doing business in the state as long as the law in effect. As a result, all the law would really succeed in doing is driving a business out of the state.

One New Jersey newspaper is calling on the state legislature to repeal the law:

There’s much more wrong with this law than postal code data collection. While the gift cards’ unused value will not be taken directly from consumers, if the law stands retailers may start putting two-year expiration dates on cards. (Otherwise, they might have to “eat” the value taken by the state to honor cards from customers who show up to redeem them after two years and a day.)

All of this runs counter to the welcome trend of businesses starting to issue “never expire” cards, with no inactivity fees. Consumers yelled long and loud to fight these booby traps.

Does the state really need this money so badly? Does it really need to create hassles for retailers? No, in both cases.

This unwise, confiscatory law also applies to phone cards and travelers’ checks. With the American Express move the start of a revolt by card issuers, lawmakers should repeal the law.

Indeed, they should.

UPDATE (James Joyner): I addressed this notion a couple years back when the District of Columbia passed a similar law (“DC Sues AT&T for Unused Customer Minutes“). The uptake:

I don’t know the status of these other suits, but agree with Radley Balko that the idea is laughable.  He quips, “Next up, D.C. sues Burger King for stray fries that go uneaten after falling to the bottom of the drive-thru bag.”  Indeed.

Escheat makes some sense in the case of physical property that is ownerless or unclaimed.  For example, property owned by  someone who dies without a will or survivors escheats to the state.  Ditto, say, tax refunds that are unclaimed after a certain period of time.  Something has to happen to that property, after all, and the government — representing the community — is the natural beneficiary of last resort.

In the case of calling cards or gift cards, however, we have a contract between a firm and an individual:  A $50 gift card allows the holder to buy $50 of goods or services from the firm within a specified period of time.  The failure of the holder to cash in the cards does not — or, at least, should not — create cash value that defaults to the state.  Lots of transactions with theoretical value go uncompleted and the beneficiary is the other party.

If, for example, I promise to buy someone a beer the next time they’re in town but they don’t come back to collect the beer, do I owe the mayor a beer?  Or, using the example here, the retail value of said beer?  Do I have to leave him a tip, too?

Gift Cards With A Ribbon image via Shutterstock

FILED UNDER: Taxes, US Politics
Doug Mataconis
About Doug Mataconis
Doug holds a B.A. in Political Science from Rutgers University and J.D. from George Mason University School of Law. He joined the staff of OTB in May 2010. Before joining OTB, he wrote at Below The BeltwayThe Liberty Papers, and United Liberty Follow Doug on Twitter | Facebook


  1. Davebo says:

    What about The Credit CARD Act of 2009?

  2. anjin-san says:

    This seems entirely unreasonable. We have several gift cards knocking around that are more than two years old, I am just getting ready to apply one to some new exterior lighting.

    I don’t see the difference between a gift card and some extra cash stashed away. I hope the card issuers continue to push back hard against this.

  3. With the injunction mentioned in the above-quoted text now lifted, all of these retailers would be required to start keeping note of the Zip Code of each person who buys one of the gift cards, and reporting the same to state even though they have no way of knowing if the information provided by the customer is accurate.

    Also, information about the person who purchased the card tells you very little about the actual owner, given that, as the name “gift card” might suggest, they’re generally purchased as gifts for a completely different person.

  4. legion says:

    So, a Republican-run state is leading the way in practices that are both anti-business _and_ anti-consumer? Wait till Fox News hears about this!

  5. legion,

    The New Jersey legislature is completely controlled by Democrats. And your partisan rant doesn’t explain how a Democratic state like New York would have a similar law. But, why let facts get in the way of partisan rants, right?

  6. 11B40 says:


    I live in the San Francisco Bay area, several soviets south of what the locals, for some reason or other, refer to as “The City”. I get a monthly disbursal from one of my IRAs. I failed to cash February’s check until late last month. Last Friday, I received a letter from the IRA company advising that the check hadn’t been paid and that I should cash it lest it fall under the auspices, if that’s the word, of Californication’s abandoned property law.

    Similarly, last year, I received a letter from a small local bank, where I have a very small balance account mostly to cash checks conveniently, that, because I hadn’t made any deposits or withdrawal lately, the balance in the account was in danger of being declared abandoned and transfered to the state government. Apparently, all those miniscule monthly interest payments and unreturned monthly account statements don’t quite qualify as account activity in our brave new world.

    I suppose that if you throw out a big enough net over California’s 30 million or so legal and illegal subjects that there’s a serious pile of cash to be had. And the growing cynical part of my brain seems to be instant messaging me that this extraction process will only be expanded in the future.

  7. legion says:

    @Doug Mataconis: First, lots of silly things come out of legislatures of either flavor; it’s Christie that signs it, so it’s Christie that’s going to get blamed for the impact. I would point out that people on the left, who are less than thrilled about the terrible JOBS act, are blaming _Obama_ for signing the piece of crap. So yeah – I’ll paint this as Republican.

    Second, the main problem with Jersey’s new law is its ridiculous timeframe; even NY’s law allowing similar confiscation doesn’t come into play until 5 years. That’s what is unreasonable & bad for everyone except the state treasury. At least until business taxes drop off…

  8. Tsar Nicholas says:

    Escheat is the one of the worst legal concepts in the history of legal concepts. It’s always been a pet peeve of mine, whether applied to estates, cars or to gift card balances.

    If we absolutely must do something about unused gift card balances, for example, why not transfer them to established, secular charities, such as the American Red Cross? These gift card laws are nothing but naked revenue grabs by various state governments. Disconcerting. Despicable.

  9. grumpy realist says:

    @Tsar Nicholas: Obviously you’ve never had to track down long-lost relatives for estates.

    At some point, you can’t find anyone and the stuff is STILL sitting there. If it’s real estate, there are real estate taxes to be paid on it. If it’s anything else aside from IP, it’s gotta be stored somewhere (which also costs $).

    So who’s going to keep track of what’s in the estate and how much $ is left?

    At some point, just drawing a line under the whole thing and saying “ok, the state gets it” is the most elegant way of cleaning up the mess.

    (You probably don’t like laches either, I bet.)

    Oh, and if you really want someone to blame, blame the Founding Fathers of our country. After all, we *could* have decided to copy something else aside from English Common Law. (I bet you’ll find a version of escheat in all civil codes as well, though.)

  10. Tsar Nicholas says:

    @grumpy realist: Actually, I like laches. I like unclean hands. I like all sorts of common law equitable principles, especially since I’ve used them as technical defenses to win cases or to reduce settlements. But those are items that apply to individuals who either are dilatory or culpable. Escheat is a windfall for governments.

    Again, why not transfer title of property in limbo to established, secular charities?

    Dude dies and his next of kin can’t be located. Owns a home. Why not give title to a battered women’s shelter charity? Regarding property taxes the county will have a lien. They’ll get paid. If the back property taxes are oppressive then the charity to which you transfer title can be given some sort of a tax break.

    The probate court and its judges, clerks and administrators can keep track of things. That’s why our tax dollars are paying their salaries.

    Woman dies and her next of kin can’t be located. Owns valuable artwork. Why give the state a windfall witih escheat? Why not transfer title to a non-profit art museum or to a non-profit art school?

  11. @legion:

    First, lots of silly things come out of legislatures of either flavor; it’s Christie that signs it, so it’s Christie that’s going to get blamed for the impact.

    In other words, if there’s a Republican involved anywhere along they way, it’s entirely their fault, regardless of how much control over the process Democrats may have had at other points along the way.

  12. @Tsar Nicholas:

    Why not give title to a battered women’s shelter charity?

    Because it would basically just become away for politicians to legally give kickbacks to their supporters by transferring property to various “charities” run by their allies?

  13. legion says:

    @Stormy Dragon: Again, two answers. First, if there’s a Dem involved anywhere along the way, the other side paints it as a “Dem initiative”, so I’m just trying to paint both sides with the same brush. Second, unless it was done over Christie’s veto, he still chose to sign it. Just as Obama’s signed terrible legislation before. It gets lumped in as part of their “legacy”, for better or worse. Hell, I even read today that GW is upset they’re still referred to as the “Bush Tax Cuts”. Boo-frickin’-hoo. Being associated (right or wrong) with things like this are part and parcel of sitting in that Big Chair.

  14. Davebo says:

    The Credit CARD Act of 2009 was signed into law on May 22, 2009. While the majority of the Act pertains to credit cards, the act also addressed changes to how federal law regulates gift cards. The federal laws went into effect on August 22, 2010.

    Cards Covered Under Federal Law
    Store issued gift cards (physical/plastic, electronic/email )
    Bank issued gift cards (Visa, MasterCard, American Express, Discover)
    Federal Gift Card Law: Expiration Dates
    Gift card funds may not expire before 5 years
    If a gift card is reloadable, any funds added to the card must remain valid for a full 5 years
    Federal Gift Card Law: Post-sale Fees
    All fees must be clearly disclosed on the card or the card’s packaging
    Post-sale fees may be imposed only if the card has not been used for 1 year or more
    Only one post-sale fees may be charged per month
    Card Replacement fees are not allowed for card which expire, but funds have not expired (typically bank issued gift cards).
    Lost or stolen gift card replacement fees are allowed.
    Exceptions to Federal Law
    The federal law excludes the following cards:
    Reloadable prepaid debit cards not intended for gift giving purposes
    Promotional or rewards cards given away for free by the issuer may expire in one year or have fees prior to one year.

    Also, see The Federal Reserve Board Site

    Seems pretty clear cut to me unless New Jersey thinks it’s law trumps federal law.

  15. PD Shaw says:

    @Davebo: Could be, but your summary sounds like federal restrictions on the issuer of cards, not a federal restriction on state esheat laws.

    Sounds like a good argument though that the state is “taking” a property right that has a guaranteed five-year life, and should pay for any claims that arise between years two and five.

  16. DRE says:

    @Doug Mataconis: I suppose I could be mistaken, but I thought legion was mocking partisan rants, not seriously making one.

  17. DRE says:

    @Tsar Nicholas: Why give the state a windfall witih escheat? Why not transfer title to a non-profit …

    Who is giving the state a windfall? Who is transfering title? The “state” in some form or other is deciding what happens to the property. You are just asking the state to give it to some “worthy” recipient. In order to do that the “state” must claim it.

  18. legion says:

    @DRE: More pointed at Fox News & others whose stock-in-trade is such rants, but yeah.

  19. rudderpedals says:

    I’m OK with this. The gift card holder can get the $ from the state’s unclaimed property registry.

  20. Tsar Nicholas says:

    @DRE: Escheat by definition is a transfer of title to the state. That’s what escheat is all about. That’s what Grumpy Realist and I were discussing.

    Next topic: It’s incorrect to say that to transfer these sorts of items to “worthy recipients” the state must first claim the property. Simply not true. The same way for example that New Jersey has a statute that says unused gift cards become property of the state after a certain length of time, a state could have a statute that says after so and such years unused gift cards are to be transferred to a secular charity that deals in the goods to which the cards are most closely related.

    The state never has to claim the property. That’s my whole point. Why should state governments be grabbing revenues out of thin air? When you take into account taxes, fees, penalties, rents, royalties, etc., doesn’t the state have enough sources of revenue? Do they really need to be grabbing unused gift cards?? Seems rather dystopian, at least to my way of thinking. Then again, keep in mind I have a pathological anti-government bent…. 😉

  21. RWB says:

    Look at this article in the context of the later “The Perils Of A Cashless Society” thread.

  22. grumpy realist says:

    @Tsar Nicholas: Well, considering that property rights wouldn’t exist unless they were enforced by the government, why not interpret escheats to be the price we pay to government for the service?

    There’s a lot of so-called “rights” that people claim exist somewhere out there in absentia, ignoring that there’s no way they would exist except for permission (and enforcement) by the government. Limited liability for corporations, for example. You want to set up a business and not have to register it with the state? Bravo, you’re a partnership. The downside is that you have unlimited liability. Want limited liability? Well, that’s a permission to be granted by the state, because limited liability is not the status quo under common law.

    Ditto for property…..the lawyers here will know well what I mean.