As you might have guessed, New Jersey’s attempt to collect an additional $79.5 million in revenue per year by revising the Uniform Unclaimed Property Act is causing a legal uproar in Trenton’s federal court. Monday’s article on Law.com which covered the proposed unclaimed property law revision caught our eye, as there are currently three lawsuits contesting that the recent revision is pre-empted by federal law and violates the Constitution’s taking, commerce, contract and due process clauses.
So just what does the law say? On July 1, 2010, New Jersey passed a revision to the Uniform Unclaimed Property law stating that gift cards – which were not previously covered by the unclaimed property act – are presumed abandoned after two years. This includes paper gift certificates and rebates cards. The law also reduces the time to redeem travelers’ checks and money orders from 15 years to three years and seven years to three years, respectively. Finally, the law forbids fees charged on stored value cards and limits the amount of dormancy fees businesses can charge on travelers’ checks.
The lawsuits involve American Express Travel Related Services Company, the New Jersey Retailers Association and the New Jersey Food Council, and are all seeking a preliminary injunction against enforcement of the law.
Having sued on September 23, American Express argues that New Jersey is the only state to change the abandonment period on travelers’ checks from 15 years to three years. It complains this law in no way benefits owners of travelers’ checks.
New Jersey Retail Merchants Association
The NJ Retail Merchants Association, on the other hand, states that the revised law does not align with New Jersey Superior Court, Appellate Division ruling, Matter of November 8, 1996 Determination of the State of New Jersey, Dept. of Treasury, 309 N.J. Super. 272, which holds that gift cards are not subject to escheatment.
New Jersey Food Council
The Food Council believes another portion of the revised law, which applies only to retailers selling more than $250,000 worth of gift cards a year, is unfair since individually owned businesses operating under a common trade name are treated as a single issuer.
In the eyes of some members of New Jersey Legislature, the revised law will protect consumers from dormancy fees and bring order to the state’s unclaimed property laws. However, Assemblymen Patrick Diegnan Jr. and Paul Moriarty are in disagreement. On September 20, they introduced A-3250 in an effort to reverse the new law, as they believe that it has caused uncertainty for both businesses and consumers. Stay tuned to see how this all unfolds.
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