First, let me give you a little background. A thousand years ago a system of government evolved which we today call Feudalism which, according to Wikipedia:

was a set of legal and military customs in medieval Europe that flourished between the 9th and 15th centuries, which, broadly defined, was a system for structuring society around relationships derived from the holding of land in exchange for service or labour.

In return for the lord's protection, a vassal promised to fight for the lord at his command. All lands so held by vassals were deemed to be held either from his lord, or from the king as lord. However, if the vassal abandoned the property or was banished or through some crime such as treason forfeited the land, the lord would resume his original title to the land by way of escheatment.

All modern escheat laws are based on this original concept. We are all familiar with seeing newspaper pages filled with bank accounts or lists of personal property that are deemed to be abandoned or unclaimed after a period of time specified by state law (usually five years). The real owner may always make a claim (1) to recover his property.

With tax revenues down and the bad economy, many fiscally ailing states are looking for new ways to raise revenue. One such way is to beef up the enforcement of their escheatment laws and by declaring certain types of property as unclaimed and subject to escheat, such as prepaid debit cards and even gift certificates after they expire.

In New York State, for example, unused phone time after a certain dormancy period may require the issuer to file and transfer the unused moneys to the state. Some prepaid phonecard companies therefor locate their billing offices in another state which doesn't have such regulations.

Now we learn that New Jersey wants to suck the money out of your unused gift cards, prompting American Express to pull its cards off shelves rather than comply with the new law:

6abc.com, 2 Apr 2012, NJ wants to collect on unredeemed gift cards

The state will soon begin requiring gift card sellers to obtain ZIP codes from buyers so it can claim the value of cards not redeemed after two years. At least one major seller, American Express, has pulled its cards from shelves rather than attempt to comply.

Shoppers would still be able to redeem a card after two years, if it hasn't expired. But if the state has already laid claim to the money, businesses might have to jump through administrative hoops to get reimbursement - and therefore stop selling gift cards altogether to avoid the hassle.

"No other state in the country requires this of retailers," said John Holub, president of the New Jersey Retail Merchants Association, which represents 3,500 retailers and is one of three groups to sue over the law. "The loser is going to be the consumer, because gift cards from some of their favorite retailers may no longer be available."

Now you may complain that you would rather have unused gift card balances going to your state coffers rather than remain with the card issuer, however the unused balances is what enables the business to cover the costs of printing the card, shipping it to the retailer, maintaining the servers that contain card information, and so on.

According to the New York Times (2), between 5-15% of gift card values are never redeemed - this is called 'breakage' in the industry. However, what New Jersey is ignoring is that without breakage, the issuer in many cases cannot make a profit. For example, American Express has no service or monthly fees on its gift cards after the initial purchase fee which goes to the retailer as commission for selling the card. So if the consumer uses up the entire balance of the card, or the state takes that balance, then Amex cannot make a single penny on its gift cards, which explains why they pulled their cards from New Jersey stores.

In addition, American Express does not expire their cards although the cards do have a valid-thru date which is required for retailers who ask for a plastic expiration date during the transaction. Once you have gone past the valid-thru date you can call American Express and they will either issue you a check for the unused balance or give you a new card. If American Express is forced to turn over these moneys to the state and the consumer later calls to get a new card, then the company will be forced to put in a claim to get the funds back. Just another layer of bureaucracy to make doing business in New Jersey that much harder.

If New Jersey is allowed to drain these funds from gift cards, it will only result in making the cards more expensive to initially load up. It will be the consumer who suffers.

My suggestion to you dear reader, if you live in New Jersey, is to give a bogus zipcode if you are asked by a retailer selling you a gift card. Use 10013 which is lower Manhattan.

Earlier this year, I wrote Do Not Buy Prepaid Debit Cards warning my readers to avoid those cards with exorbitant service and monthly fees.