Bill Text: NJ A3480 | 2014-2015 | Regular Session | Introduced

New Jersey Assembly Bill 3480 (Prior Session Legislation)

Bill Title: Eliminates consumer data collection requirements for certain gift cards.

Spectrum: Partisan Bill (Democrat 4-0)

Status: (Introduced - Dead) 2014-12-18 - Substituted by S2235 [A3480 Detail]

Download: New_Jersey-2014-A3480-Introduced.html

LEGISLATIVE FISCAL ESTIMATE

ASSEMBLY, No. 3480

STATE OF NEW JERSEY

216th LEGISLATURE

DATED: JULY 3, 2014

SUMMARY

Synopsis:	Eliminates consumer data collection requirements for certain gift cards.
Type of Impact:	Recurring Unclaimed Personal Property Trust Fund revenue loss starting in FY 2023.
Agencies Affected:	Department of the Treasury.

Office of Legislative Services Estimate
Fiscal Impact	Prior to FY 2023	FY 2023	FY 2024
State Revenue Loss	$0	$17,500,000 to $26,300,000	$18,900,000 to $28,300,000

� The Office of Legislative Services (OLS) projects the legislation to have no fiscal impact prior to FY 2023 and to lower Unclaimed Personal Property Trust Fund collections by $17.5 million to $26.3 million in FY 2023. Thereafter, the OLS expects the revenue loss to grow by 7.6 percent per year. It is unclear what portion of the revenue that would have accrued absent the bill's enactment the Department of the Treasury would have elected to transfer to the General Fund as State revenue.

� The State revenue loss will occur because the bill will deprive the State in many instances of purchaser information and thus limit the State's ability to assert jurisdiction over many unused stored value cards under federal priority rules governing states' competing claims to abandoned property. Without jurisdiction, in turn, the State cannot initiate escheat action under the State's unclaimed property laws with respect to concerned unused stored value card balances. After the enactment of this bill the State will thus only have the legal authority to take custodial possession of unexpended balances on stored value cards for which card issuers voluntarily collect purchaser information.

� No State revenue loss will occur prior to FY 2023 as the first cohort of unused stored value card balances that would have escheated to the State as abandoned property based on the current consumer information collection requirement would not have done so until FY 2023.

BILL DESCRIPTION

Assembly Bill No. 3480 of 2014 eliminates the requirement that merchants begin to collect in July of 2016 the name and address of purchasers of qualifying stored value cards, such as gift cards and certificates, and maintain, at a minimum, a record of the purchasers' zip codes.

The collection of purchaser information is a prerequisite under federal priority rules governing states' competing claims to abandoned property for the State to establish jurisdiction over unused stored value cards. Once jurisdiction is established, 60 percent of unexpended qualifying card balances escheat to the State following a five-year inactivity period.

In general, under the State's unclaimed property laws, the State deems certain properties abandoned by their rightful owners if no activity related thereto has been recorded during statutorily defined periods of time. The State then takes custodial possession of the property ("escheatment"), deposits it in the Unclaimed Personal Property Trust Fund, and records a portion of its value as State revenue. Rightful owners can reclaim their property at any time.

FISCAL ANALYSIS

EXECUTIVE BRANCH

None received.

OFFICE OF LEGISLATIVE SERVICES

The OLS forecasts the legislation to have no fiscal impact prior to FY 2023 and to lower Unclaimed Personal Property Trust Fund collections by $17.5 million to $26.3 million in FY 2023. Thereafter, the OLS expects the revenue loss to grow by 7.6 percent per year. It is unclear what portion of the revenue that would have accrued absent the bill's enactment the Department of the Treasury would have elected to transfer to the General Fund as State revenue.

The State revenue loss will occur because the bill will deprive the State in many instances of purchaser information and thus limit the State's ability to assert jurisdiction over many unused stored value cards under federal priority rules governing states' competing claims to abandoned property. Without jurisdiction, in turn, the State cannot initiate escheat action under the State's unclaimed property laws with respect to concerned unused stored value card balances. After the enactment of this bill the State will thus only have the legal authority to take custodial possession of unexpended balances on stored value cards for which card issuers voluntarily collect purchaser information.

Timeline: The OLS anticipates that the legislation will produce an annual State revenue loss starting in FY 2023. This is so because under existing law card issuers must begin in July 2016 to collect data identifying the purchasers' residence--information that is a prerequisite for the State to establish jurisdiction over unused stored value card balances. Once card issuers have purchaser information, they must report unexpended card balances to the State after five years of inactivity, or in July 2021 for the first batch of gift card balances deemed abandoned under the current customer information collection requirement. Since card issuers have until November in the following fiscal year to transfer to the State the accumulated balances that were deemed abandoned in a given fiscal year, the State will not take custodial possession of the first cohort of unexpended card balances under the current customer information collection requirement until November 2022, or in FY 2023.

"Lost" New Jersey Stored Value Card Balances: The OLS projects that $292.3 million in stored value card balances owned by New Jersey consumers will either expire or be consumed by issuer fees in FY 2023. Under current law and jurisprudence, the State could take possession of a portion of this amount.

The OLS builds its estimate on CEB TowerGroup market research relating that about $1 billion in nationwide gift card balances represented "spillage" in each of calendar years 2013 and 2014. ("Spillage" refers to balances that expired and amounts lost due to fees charged by card issuers.) The OLS converts the calendar year numbers to a $1 billion FY 2014 figure. Next, the OLS apportions 3.78 percent thereof to New Jersey based on the ratio of the tax year 2011 federal adjusted gross income of New Jersey taxpayers relative to that of all United States taxpayers, as reported by the federal Internal Revenue Service. Consequently, the OLS estimates that New Jersey consumers lost $37.8 million in gift card balances in FY 2014.

For future years, the OLS applies a 7.6 percent annual growth rate to the $37.8 million, or the annualized growth rate for nationwide gift card sales from calendar year 2009 to calendar year 2013 using CEB TowerGroup data. For FY 2023, when the first batch of gift cards subject to the purchaser information collection requirement under current law will become escheatable, the OLS thus estimates $73.1 million in gift card balances that New Jersey consumers will loose.

The $73.1 million appears to be an underestimate, however, in light of the federal Credit Card Accountability, Responsibility and Disclosure Act of 2009. Effective as of February 2010, the act mandated a minimum five-year period after activation before gift cards can expire. The deferment temporarily reduced the value of lost gift card balances below historic levels from February 2010 through at least February 2015. According to CEB TowerGroup data, the ratio of lost card balances relative to new card purchases was about 0.85 percent in calendar year 2013 and is expected to decline to about 0.79 percent in calendar year 2014. The ratio had been 8.3 percent in calendar year 2007 and 7.7 percent in calendar year 2008.

Although not anticipating the ratio to return to previous levels, the OLS does expect an increase over the current 0.85 percent starting in February 2015, when balances on the first stored value cards acquired in February 2010 under the terms of the federal law will begin to expire. For that reason, the OLS quadruples the 0.85 percent ratio to 3.4 percent for stored value cards that will be sold starting in July 2016, when the State's purchaser information collection requirement will go into effect under existing law.

The OLS believes that the quadrupling of the ratio is also reasonable because the federal law prohibits the imposition of dormancy, inactivity or service fees before a card has been inactive for at least 12 months. The OLS expects this limitation to preserve the value of gift cards, which, in turn, should expand the pool of potentially unused escheatable card balances under current law.

Accordingly, the OLS quadruples to $292.3 million its provisional estimate that $73.1 million in current New Jersey gift card balances will escheat to the State in FY 2023.

Escheating New Jersey Stored Value Card Balances: Several restrictions on the scope of potentially escheatable stored value card balances, enumerated below, motivate the OLS to expect that under current law the State would only take custodial possession of between 10 percent and 15 percent of the estimated $292.3 million in gift card value that New Jersey consumers will forfeit in FY 2023. The State might thus collect between $17.5 million and $26.3 million and the OLS adopts this range as the bill's estimated FY 2023 revenue loss and applies an annual 7.6 percent growth factor thereto for subsequent fiscal years, or the annualized growth rate for gift card sales from calendar year 2009 to calendar year 2013, as reported by CEB TowerGroup.

Seven factors restrict the scope of potentially escheatable stored value card balances. First, P.L.2012, c.14 stipulates that only 60 percent of abandoned card balances escheat to the State. Second, P.L.2010, c.25 and P.L.2012, c.14 exempt from escheatment a) cards issued under a promotional program, customer loyalty program, charitable program or by a business having sold $250,000 or less of stored value cards in the prior year; and b) cards redeemable for admission to events or venues (such as movie theaters) and the purchase of goods and services at the event or venue. Third, P.L.2010, c.25 authorizes the State Treasurer to exempt from the escheatment process businesses that demonstrate that they cannot reasonably comply with the law. Fourth, P.L.2012, c.14 created the right for certain card holders to receive cash from card issuers equal to the amount of unexpended card balances if they are less than $5. Fifth, CEB TowerGroup's "spillage" category on which the OLS bases its estimate includes card value consumers loose because of card issuer fees and because issuers cease business operations. But neither are subject to escheatment. Sixth, it is unclear to what extent merchants and consumers would comply with the purchaser information collection requirements under current law. Seventh, while upholding a significant portion of New Jersey's stored value card escheat program, courts have already constrained its originally envisioned scope.