State files suit over Simon gift cards
The state is suing the owner of the Pheasant Lane Mall, charging that the company’s gift cards violate state law for having expiration dates and decreasing in value over time.
The attorney general’s office on Monday sued Simon Property Group, which manages the Pheasant Lane Mall, the Rockingham Mall in Salem and the Mall of New Hampshire in Manchester, for violating the Consumer Protection Act. The complaint against North America’s largest shopping mall owner was filed in Merrimack County Superior Court.
A similar lawsuit was filed against the company on Monday in Massachussetts. The company has filed its own lawsuit in federal court arguing that gift cards are regulated by the federal government, not states, according to Spokeswoman Michal Regunberg.New Hampshire law prohibits companies from placing expiration dates on gift certificates or reducing the value of gift certificates through service charges, dormancy fees and other administrative charges.
Gift cards are considered gift certificates and are subject the same laws, according to the attorney general’s office.
Simon cards decrease in value over time and have expiration dates, according to the AG’s office.
After six months, Simon charges $2.50 per month for the gift card and the card expires after a year. Consumers can reinstate the card after a year, but have a $7.50 administrative fee subtracted from the card’s remaining value.
For example, a gift certificate purchased at a value of $25 would be worth $2.50 if it were reinstated after a year, according to the AG’s office.
The cards are not subject to state law because they are issued by the Bank of America. The cards can be used anywhere Visa debit cards are accepted and therefore are different than a retailer gift certificate, according to company officials.
“It is within the authorized powers of a national bank like (Bank of America) to issue prepaid products such as the Simon Visa Giftcard, establish an expiration date, charge and determine the amount of fees, and provide disclosures of the terms and conditions in accordance to federal regulations,” attorneys for the company, Cheryl Cronin and Nancy Wilsker, said in a written statement.
The fees charged offset the costs of maintaining the account, processing transactions and protecting against fraud, according to company officials.
The company’s practices violate the Consumer Protection Act, argued Attorney General Kelly Ayotte, pointing to the dramatic decline in a card’s value over time.
“As you can see, it does not take long for the gift card to become functionally worthless,” Ayotte said in a written statement.
The Consumer Protection and Antitrust Bureau received about 10 complaints about the gift card, according to the Attorney General’s Office.
Simon Property Group began selling the gift cards last year and sold about $360 million in gift cards. The company is expecting that number to top $400 million this year, Regunberg said.
The prepaid cards are sold in 35 states at 159 malls.
Customers like the card’s convenience and many companies have begun awarding the cards as gifts and for incentives, Regunberg said.
The fees are clearly explained to consumers, she said.