Connecticut Retailers Settle Gift Card Violations

Companies accused of violating ban on inactivity fees

January 2, 2009

Simon Malls • Connecticut Retailers Settle Gift Card Violations • NY Sues Simon for Gift Card Fees • MA, CT Challenge Gift Cards

The state of Connecticut has reached an agreement with Simon Property Group, LCC and SPGGC, LLC, owners of the Crystal Mall in Waterford, to settle allegations that they violated the state ban on gift card inactivity fees.

Attorney General Richard Blumenthal says the owners will pay $308,736, including $258,736 in refunds to consumers subjected to inactivity fees on Simon gift cards from August 16, 2003 to January 31, 2005.

The remaining $50,000 reimburses the state for investigative and litigation costs and will go into the General Fund.

The settlement includes $258,736 in refunds to consumers subjected to inactivity fees on Simon gift cards from August 16, 2003 to January 31, 2005. The remaining $50,000 reimburses the state for investigative and litigation costs and will go into the General Fund.

The agreement settles a lawsuit that Blumenthal filed against Simon in 2004 on behalf of DCP and the treasurer.

"While this restitution is welcome and significant — almost $260,000 back to consumers whose cards improperly lost value because of dormancy fees — it also shows how sadly and starkly deficient the law is," Blumenthal said. "At the time, Simon brazenly devalued gift cards by hundreds of thousands of dollars. Now, the company's actions would be beyond the state law enforcement because it has shifted to cards issued through a national bank, deemed subject only to federal law."

Blumenthal says the national bank legal loophole must be closed, "so that unfair restrictions and fees are stopped, whoever issues the cards." He pledged to seek state legislation requiring retailers who use national banks to circumvent state consumer protection laws to post prominent warnings that their gift cards are subject to inactivity fees and expiration dates.

State Treasurer Denise L. Nappier said she is pleased that Simon Property Group has agreed to return money that rightfully belongs to the gift card holder, but cautioned consumers to be aware of the potential hazards of giving and receiving gift cards and gift certificates.

Blumenthal estimated that thousands of consumers are eligible for refunds ranging from $2.50 to about $50. The total restitution is the amount that Simon collected in dormancy fees from Connecticut consumers during the time period covered by the agreement. Simon charged consumers a $2.50 per month "administrative" fee on cards not fully redeemed after six months.

The agreement requires Simon to post signs at Crystal Mall informing consumers subjected to inactivity fees on their gift cards between August 13, 2003 and January 31, 2005 that they are eligible to apply for restitution.

Simon is now issuing gift cards through two national banks, MetaBank and U.S. Bank, to circumvent Connecticut's ban on dormancy fees. Because they are national banks, their cards are governed by federal law, which allows dormancy fees. Simon is charging $2.50 a month on cards 13 months and older.

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