Attorney General: Attorney General, DCP, Treasurer Announce $308,000 Settlement With Crystal Mall Owners For Alleged Violations Of State Gift Card Laws

Connecticut Attorney General's Office
Press Release

STATE OF CONNECTICUT
NEWS RELEASE

ATTORNEY GENERAL RICHARD BLUMENTHAL
DEPARTMENT OF CONSUMER PROTECTION COMMISSIONER JERRY FARRELL, JR.
TREASURER DENISE L. NAPPIER


Attorney General, DCP, Treasurer Announce $308,000 Settlement With Crystal Mall Owners For Alleged Violations Of State Gift Card Laws

December 29, 2008

Attorney General Richard Blumenthal today announced that the owners of the Crystal Mall in Waterford will pay $308,736 -- mostly for refunds to thousands of consumers -- to settle allegations that they violated the state ban on gift card inactivity fees.

Blumenthal reached the agreement with Simon Property Group, LCC and SPGGC, LLC on behalf of Department of Consumer Protection (DCP) Commissioner Jerry Farrell, Jr. and state Treasurer Denise L. Nappier.

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.

Blumenthal said, "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. 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.

"We must close the national bank legal loophole, so that unfair restrictions and fees are stopped, whoever issues the cards. I will seek state legislation requiring retailers who use national banks to callously circumvent state consumer protection laws to post prominent warnings that their gift cards are subject to inactivity fees and expiration dates.

"Simon customers effectively paid money for nothing, putting pure unearned profit into Simon's pocket. Gift cards are supposed to be cash on call, and consumers should get every penny.

"I will continue fighting at the state and federal levels to assure consumers receive all the cash on their cards, stopping junk fees and arbitrary expiration dates that bleed value to zero," Blumenthal added.

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.

Nappier said, "My administration has always maintained that Connecticut gift card holders are entitled to the full value of their gift cards. That's why I fought for a law eliminating expiration dates and inactivity fees in the first place."

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. The signs instruct consumers to contact Blumenthal's office at (860) 808-5420 to obtain claim forms. The notices must stay up until February 2, 2009.

Consumers must submit claims by April 3, 2009 and will receive back 100 percent refunds of the fees charged them. Any undistributed funds will go into the state's General Fund.

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.

Blumenthal has long fought to close the federal national bank loophole so Connecticut consumers are protected from inactivity fees, as well as expiration dates, regardless of who issues their gift cards.

Simon Gift Card Claim Form - (PDF-26KB)