American Express stops selling gift cards in New Jersey over ZIP code requirement

New York -- American Express Co. has become the first company to pull its gift cards from being sold in New Jersey drug stores, supermarkets and convenience stores in response to a controversial new revision in the state's unclaimed property law. (The only way New Jersey residents can now buy AmEx gift cards is directly from the company.)

Under the new law, New Jersey's Treasury Department will soon require sellers to obtain the ZIP code of everyone who buys a gift card. The state believes that by so doing, it can claim to the value of any card that is not redeemed after two years. Before the legislative revision, if a gift card went unused, the issuing business kept the money.

John Holub, president of the New Jersey Retail Merchants Association, said the law poses serious administrative burdens to businesses and potential problems for consumers.

“Retailers and gift card issuers like American Express have had serious concerns about the escheat law since it was passed nearly two years ago,” Holub told the Associated Press. “I fear many retailers are likely to follow American Express's lead because the legal risk, technological burden and steep cost of complying is simply too great.”

There is no way American Express Co. can ensure compliance with cards not bought directly from AmEx, company spokeswoman Vanessa McCutchen told The Associated Press, so the company decided to pull its cards from the shelves.

The requirement, the first of its type in the country, is being challenged in court by the New Jersey Retail Merchants Association, American Express and other groups. However, an injunction against ZIP code collections was lifted in March and the state Treasury is reportedly working with gift-card sellers to hammer out rules for its implementation.

Two years ago, the New Jersey Legislature passed a law that allows the state to claim the proceeds of gift cards bought in the Garden State if customers don't use them within two years. It saw the unused cards as an untapped revenue source that could help with the state’s budget shortfall.

A lawsuit followed and a U.S. District Court judge enjoined the collection of ZIP codes. Although the merits of the case have yet to be argued, the injunction was lifted after a subsequent hearing, paving the way for Treasury to issue guidance on new ZIP code collection requirements, the Associated Press reported.

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