NJ Federal Court Issues Another Ruling on Gift Card Law — Zip Code Requirement Goes Into Effect February 1

by admin

Escheatable has been covering the ongoing litigation concerning the New Jersey gift card legislation enacted earlier this summer.  As you may know, the federal court considering the new law enjoined the State from enforcing certain parts of the law, namely (1) a presumption that all gift cards sold in New Jersey were escheatable to New Jersey; and (2) a provision that required merchants to escheat gift cards issued for merchandise only (and prior to the effective date of the act) to the state in cash, notwithstanding that no gift card holder could receive cash from the merchant.

When we last left the litigation, however, the parties disagreed as to whether the new law’s requirement that gift card issuers obtain purchaser or owner zip code information is enforceable (the “Zip Code Requirement”).  New Jersey took the position that the Zip Code Requirement is unaffected by the injunction, while the issuers believed that the provision can’t be enforced.

Last week, the federal court overseeing the litigation ruled that the Zip Code Requirement was not effected by the injunction, and held that it could be enforced by the State.  According to the latest information from the NJ Treasury Department, gift card issuers are to begin collecting zip code information at the time of purchase effective February 1, 2011.  As the court noted, the law does give the Treasurer authority to issue “exemptions” from these requirements upon a showing of good cause by a particular card issuer.