Gift Card Litigation Fallout — AMEX Pulls Out of New Jersey

by admin

Earlier this year, the U.S. Court of Appeals for the Third Circuit ruled on New Jersey’s 2010 legislation concerning stored value cards.  Though the appellate court ruled that certain parts of the law probably had to be struck down — most notably the use of a so-called “transactional rule” at odds with Texas v. New Jersey, the court upheld what was colloquially referred to as the “Zip Code Requirement.”  As you might imagine, that portion of the law required gift card sellers to collect purchaser and/or owner zip code information at the point of sale (presumably to avoid unused funds from escheating, if at all, to the state of the card issuer’s domicile.

In connection with that litigation, some card issuers indicated that they would simply stop doing business in New Jersey if the new law was upheld.  At the time, it is unclear whether anyone took that to be a serious threat.  Yesterday, according to The Associated Press, American Express made good on its threat, pulling gift cards from third-party sellers like grocery stores, pharmacies, etc.  Among other things, AmEx contends that it can ensure compliance with New Jersey’s law with regard to those items sold by third-parties.  According to the article, New Jersey residents will only be able to buy AmEx gift cards through the company.

For its part, the New Jersey Treasury Department denies that the legislation puts an unfair burden on issuers, and claims that it will not begin to enforce the Zip Code Requirement until it figures out how to do so in a manner “that is uniform and as least onerous as possible.”  No word on whether other issuers will follow AmEx’s lead.