New Jersey Has No Skin in the Gift Card Game
New Jersey recently put a gift card law into effect that is driving gift card retailers out of the state. The basic situation is that if a gift card goes unused for two years, the unspent amount is to be turned over to the state. Lawmakers say the law is in the best interest of consumers because they can reclaim unused gift card amounts via the unclaimed property database. But in order to do that, retailers must get consumer address information when a gift card is purchased. Seriously?
Kiosks Pulling Out of New Jersey
The net effect, so far, is that gift card kiosk companies like Blackhawk Network (think Gift Card Mall at Safeway) and InComm (think kiosk at Wal-Mart) are closing up shop, citing it’s too difficult to comply with the law. The governor says companies are just leaving because they don’t want to give up the profits and he’s not concerned about the exit. Regardless, as a consumer, I’d be upset.
Impact is Major Inconvenience
The law, designed to help consumers, makes life significantly less convenient both in terms or buying and recouping.
- Buying Delays – As if retailers don’t know enough about us already, the new law requires the cashier to ask for address information when purchasing a gift card. Assuming you don’t mind giving up the personal data, the checkout line will undoubtedly grow as the transaction is completed.
- System Change Costs – Stores all over the state will also have to change their payment systems to capture and house the data with the gift card purchase. The aforementioned kiosk companies say the cost of making those changes are too high and they are opting to cancel their programs instead.
- Kiosks Closed – With the kiosks closed, consumers will be unable to buy third-party gift cards when doing other shopping. If you want a movie gift card, you’ll have to stop by the theater to get it. If you want an AMEX gift card, you’ll have to get it online instead because they are no longer available in New Jersey stores. What a pain!
- Who Recoups? – So here’s the big deal for me. Who gets to claim the money? Suppose retailers and card companies go through all the cost and effort required to capture the purchaser of the gift card. Who knows where the card has gone? More than likely, it’s been given away as a gift. It’s gone! So the person who spent the money can’t get it back. And the person who has the gift card isn’t the one on record. I presume, you need a match in order to make a claim. Or, at the very least, you have to know where the card is. Can the giver get the money back? (Can I have the money back for the sweater I bought you last year that you never wear?)
If the card hasn’t been used in two years, it’s likely the recipient has lost it or forgotten about. In which case, the person with the plastic won’t even know they can reclaim it. (If the sweater got thrown into the back of the closet, does he or she care that it’s missing?)
This situation is flawed on many levels.
Federal Offense
Lastly, the Federal CARD ACT that went into effect in 2009 says gift cards can’t expire in less than five years and fees can’t be charged against the card unless its been inactive for over a year. So how does New Jersey justify stripping the card after two years?
Trying to Get a Piece of the Pie
For all the benefit and convenience that gift cards provide consumers, we often only hear the negative. And the criticism most often is about “breakage” – fighting over who gets the money when a gift card goes unspent. Though billions of dollars are wasting away in sock drawers, a good many more dollars are spent at the designated retailer. And since consumers often overspend their gift cards, the retailer benefits more from having a card used than having it go unused. Still, the issue of breakage is the primary focus.
Everybody wants to be the gift card ISSUER. Currently, this is the player who gets to eventually recoup the unused dollars allocated to the gift card retailer. Other companies are profiting from the multi-billion dollar gift card industry by providing secondary services such as Plastic Jungle and CardPool. Both buy unused gift cards and put them back on the market at a discount. And people like me make money on gift cards through advertising, creating gift card holders, and delivering them with a personal touch.
I understand the involvement of all these players and then some. What I don’t understand is how the state of New Jersey inserts itself into the gift card puzzle without any skin in the game. Seems to me they just want a piece of the pie without doing any of the work. Reminds me of a story about a little red hen.
