New Jersey goes after gift cards

Stored value cards (commonly referred to as “gift cards”) have gone from a gift of last resort to a juggernaut of the retail industry.  These descendants of the paper gift certificates are now the number one holiday gift item, and sales of gift cards continue to increase this year.  Of course, as gift card sales have increased, governments have become more interested in regulating their use.  As has been widely reported, the Federal Credit CARD Act of 2009 imposed new requirements on gift card issuers relating to the assessment of dormancy fees (e.g., fees assessed for inactivity) and expiration dates.  Less reported has been the gradual expansion of state unclaimed property laws to inactive or unused gift card balances.

Earlier this summer, New Jersey joined the list of states whose unclaimed property laws expressly apply to gift cards.  New Jersey Assembly Bill 3002 (effectively July 1, 2010, but expressly retroactive) imposes a dormancy period of 2 years for gift cards.  The new law also requires gift card issuers to obtain the name and address of the card purchaser or owner.  Accordingly, for cards sold to New Jersey residents, the state will take custody of unclaimed gift card proceeds if there has been no activity on the card for two years.  Both the short two year dormancy period and the requirement to obtain purchaser name and address information are marked departures from most state laws.

Welcome

Welcome to Escheatable – The Unclaimed Property Blog.

What is unclaimed property? 
Unclaimed property is – as the name suggests – intangible property (e.g., money, a financial account, or a right to payment) that has not been claimed, or has been abandoned, by its rightful owner.  Every state has unclaimed property (sometimes referred to as “abandoned property” or “escheat”) laws.  Pursuant to these laws, corporations, financial institutions, insurance companies, and other business entities are required to turnover unclaimed property to the state after a period of time defined by the law (anywhere from one to 15 years).  Examples of unclaimed property include uncashed checks, unclaimed dividends, stale accounts receivable credits, unused gift cards, unreturned security deposits and many others. Given the varied nature of items that can give rise to unclaimed property, any business that has employees, customers, vendors, or clients probably has unclaimed property to be reported and remitted to the states.

What is escheat?
Escheat referred to the common law doctrine that unclaimed land (e.g., property of a landowner who died without heirs) reverted to the Crown.  A similar concept is bona vacantia (“ownerless goods”) pursuant to which ownerless personal property was claimed by the Crown.  The power to take custody of unclaimed lands and ownerless goods devolved to the states after the American Revolution.  Today’s state unclaimed property laws represent a type of modern-day exercise of the common law power of bona vacantia.  Notwithstanding the fact that modern unclaimed property laws are a descendant of bona vacantia, many refer to unclaimed property laws as “escheat” laws.

What is Escheatable – The Blog?
This will be a space where we provide updates on recent developments in unclaimed property law and policy.  We plan to post news regarding new unclaimed property legislation, track recent developments, and provide commentary on related topics.