To help balance the state budget this summer, lawmakers passed a bill allowing the state to claim proceeds of gift cards purchased in New Jersey if customers don't use them within two years. The state would claim funds from inactive travelers' checks and money orders after three years.
The new law was to go into effect earlier this week, but over the weekend U.S. District Court Judge Freda Wolfson issued a temporarily restraining order keeping it from being enforced until a hearing can be held.
Gov. Chris Christie will have to come up with $80 million elsewhere if the law is struck down.
Treasury spokesman Bill Quinn said the administration was reviewing the ruling. Quinn said no estimate was available on how much money the state would miss out on while the court has the law on hold.
Several companies challenged the constitutionality of the new law, including the American Express Travel Related Services Co., the New Jersey Retail Merchants Association, the New Jersey Food Council and American Express Prepaid Card Management Corp.
John Holub, president of the New Jersey Retail Merchants Association, said the new law posed a serious administrative burden to businesses and potential problems for consumers.
Currently, if a gift card goes unused, the issuing business keeps the money. Under the new law, the state could collect the money after the waiting period.
If a card were eventually used by a consumer, the state would return the money to the business, though the government would get to keep any interest it earned. Businesses would have been required to keep, at minimum, ZIP codes for the purchasing consumer.
"You buy a card to give to someone else, so you don't know who is the ultimate holder of this card," Holub said.
Also, starting Monday, retailers were supposed to turn over to the state all unredeemed balances dating back to 2003, before many retailers had set up a system for tracking purchases.
Assemblyman Paul Moriarty applauded the judge's ruling, saying that the law was akin to a tax increase.
"The sole reason for this law is to generate revenue for the state's coffers at the direct expense of consumers and businesses in New Jersey," said Moriarty, D-Turnersville.
Moriarty has introduced a measure to exempt calling cards "to ensure this horrendous law doesn't adversely affect those who rely on telephone cards," such as soldiers.
Bill sponsor Declan O'Scanlan said that the law wasn't perfect, but that it was better than making deep cuts in the face of an $11 billion budget deficit.
"I don't love this bill, but we've overspent our budget," said O'Scanlan, R-Red Bank. "The administration did everything it possibly could to get creative with the budget to avoid making cuts in other places."
O'Scanlan said many companies already keep the information now required.
"Consumers shouldn't have noticed any difference in their purchasing experience," he said.
In fact, he said consumers stood to benefit because they could still redeem gift cards after two years, when previously those cards could have expired.