State level escheatment laws govern the handling of unclaimed property. In most states, gift cards are subject to escheatment regulation. Although specific details of the law varies from state to state, restaurants are required to report unclaimed gift card balances to the state at the designated end of life.
Using the Paytronix escheatment handling services facilitates compliance. At the end of life, the balance on a card is brought to zero and its status is changed to “escheated.” Reports show a summary (as well as a detailed view) of the unused card balances to transfer to the State in accordance with escheatment laws.
Some states require that gift cards expire at their end of life. Similar to escheatment, the unused card balance is brought to zero and the status is changed to “expired.” However, unlike escheatment, expiration calls for the expired balances to be recognized as revenue. The period to expiration normally represents a substantial period of time (e.g. Massachusetts law requires the card be available for use for seven years).
The responsibility for understanding and complying with applicable laws rests with you and your legal experts. Whether your restaurants are subject to escheatment or expiration (or both!), Paytronix gives you the flexibility to properly manage outstanding gift card balances at their end of life. Based on the direction from your legal team, we can configure the appropriate end of life processing to meet your specific requirements.
Dormancy processing is another approach to handling unused gift card balances. Where applied, restaurants assess a monthly dormancy fee to reclaim outstanding card balances. State specific laws govern whether dormancy fees are allowable. If a restaurant elects to charge this fee, Paytronix enables processing and provides detailed reporting.
Download and print full write-up for Gift Cards