NJ Court Denies Injunction Sought by Amex and Merchants Over Prepaid Card Data Law

by Mercator Advisory Group 0

Last year, the state of New Jersey enacted a law that would require any company selling prepaid cards to collect identifying information about the purchaser of the cards. Its goal was to better identify cards that might be subject to escheatment after two years of inactivity. The industry, as one would expect, sued the state.

While the litigation is still ongoing, the United States District Court, District of New Jersey, denied a request by the New Jersey Retail Merchants Association, New Jersey Food Council, and American Express Prepaid Card Management Corp. This request was to either clarify an earlier injunction about the presumption of the place of purchase of a gift card, or to expand the injunction to the data collection so that merchants would not be required to collect addresses and store at a minimum, zip codes, of gift card purchasers.

Law firm Pillsbury Winthrop Shaw Pittman LLP released an advisory on the decision on January 18.

In her Jan. 13, 2011 opinion on the plaintiffs’ emergency motion, Judge Wolfson: (1) clarified that her Nov. 13, 2010 order “enjoined only the place-of-purchase presumption,”disagreeing with the plaintiffs that “the State waived any argument that subsection 5c’s data collection provision could operate independent of the place-of-purchase presumption;”(2) disagreed with plaintiffs that “the data collection provision is so interrelated with the place-of-purchase presumption that the two cannot be severed;” and (3) disagreed with plaintiffs that the court should construe the Nov.13 order as enjoining the data collection provision because that provision does not further the Supreme Court’s Texas v. New Jersey priority scheme.

Read the law firm’s advisory here: http://www.pillsburylaw.com/index.cfm?pageid=34&itemid=39973

Read the court order here: http://www.pillsburylaw.com/siteFiles/Publications/Order_January_14_2011.pdf

The battle is not yet over in New Jersey, but, for now, merchants need to collect data from the people who buy gift cards. The New Jersey Treasurer has said that issuers of “stored value cards” have until Feb. 1 to install and implement a system to record and maintain the purchaser’s zip code.

Read the Treasurer’s announcement at: http://www.state.nj.us/treasury/pdf/Notice%20of%20Compliance%20Extension%20010311.pdf

The Treasurer’s announcement about the first injunction, which contains some explanation of the provisions of the law can be found at: http://www.state.nj.us/treasury/pdf/NoticeofPreliminaryInjunction112410-Mod.pdf

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