Wednesday, April 20, 2011

The Upcoming Conflict Between Unclaimed Property Law and Consumer Privacy

This week, the Louisiana state legislature will begin to consider House Bill 128, which is a consumer protection proposal that would prohibit merchants from requesting name, address, telephone, or zip code information from any consumer in connection with a cash, gift card or credit card payment.  The Louisiana legislation comes only a few months after the California Supreme Court ruled that a retailer's request for zip code information in connection with a retail purchase violated state privacy laws. 

Why is this a big deal?  Because some other states, most notably New Jersey, are going in precisely the opposite direction, and trying to require merchants to obtain address (or at least zip code) information in connection with the sales of gift cards.  As more and more gift card issuers seek to capitalize on favorable unclaimed property laws in their states of incorporation, other states - like New Jersey - are pushing back by trying to require gift card sellers to obtain (and retain) name and address information.  While this is generally pitched as a consumer friendly requirement (in that it makes it somewhat more likely* that a gift card owner can reclaim his or her funds), consumer protection laws come in many varieties.  For every citizen who is glad to be able to reclaim a gift card from the state, there are just as many who are annoyed at having to provide personal information at the time of sale, or who are afraid that information isn't safe when retained by the merchants.

Unless the states reach some sort of consensus on this issues, merchants will be faced with the very real possibility of a patchwork of laws throughout the various states with different (and often conflicting) requirements.

*  Requiring consumer address information makes the property more likely to be claimed from the state if it is ever escheated only if the retailer is required to get complete name and address information.  In New Jersey's case - where a merchant is only required to obtain zip code information - there is no information for the state to honor reclaims.  Whether requiring zip code only is an accommodation to busy merchants, or a revenue generating measure for the state is an open question for another day.

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