The Georgia Supreme Court this week is debating a lawsuit filed by former Georgia Governor Roy Barnes over the legality of Simon Property Group gift card fees.
The suit, filed against Simon in December 2004, claims that fees and expiration dates on Simon Visa Giftcards are illegal.
“We are confident that the Simon Visa Gift card complies with all applicable laws, including the laws pertaining to gift certificates and gift cards that were enacted by the state of Georgia last year,” Stewart A. Stockdale, CMO of Simon Property Group and president Simon Brand Ventures, said in a statement.
In the suit, plaintiff Andrea Nay-Richardson claimed she bought hundreds of dollars worth of Simon gift cards at Lenox Square mall in Atlanta in May 2001, only to find they had expired when she went to use one in 2002. The second plaintiff, Betty Benson, received a $75 gift card from her employer and that too expired before she could use it.
Simon, North America’s largest shopping mall owner, was hit by a number of lawsuits in 2004 challenging its gift card fees. And in March 2005, it agreed to comply with New York’s gift card law and to pay $125,000 in penalties to settle a lawsuit brought by the state over fees on its gift card. Simon said the agreement was voluntary.
In November 2004, three New England states sued Simon alleging that it violated consumer protection laws by including fees and expiration dates on its gift cards.
In a preemptive strike, Simon sued Massachusetts, Connecticut and New Hampshire on Nov. 12 in anticipation of the Nov. 15 state suits. Simon said that its Visa Giftcard is not a retailer gift card, but a co-branded Visa card issued by Bank of America and therefore is covered by federal banking laws and not subject to state laws.
The New Hampshire federal court ruled in Simon’s favor, validating the status of the Simon Giftcard as a bank-issued product, Stockdale said.
“We believe that we provide adequate disclosure of the terms and conditions of our gift card product, and that consumers are speaking for themselves when they embrace the Simon Visa Giftcard in ever-increasing numbers,” Stockdale said.
Legal action in both Massachusetts and Connecticut continues. “The litigation is ongoing,” said Terence Burke, a spokesperson for New Hampshire Attorney General Tom Reilly.
The Simon Visa Giftcard it the largest Visa program in the world, Stockdale said. Simon Property Group, based in Indianapolis, IN, offers its gift cards in whole dollar amounts ranging from $20 to $500. The cards were introduced nationwide in 2003 after testing in five Simon Malls since August 2001. In 2004, 6.3 million cards were sold at a value of more than $400 million. Through September 2006, sales on the card are 20% ahead of last year at this time and are expected to exceed $500 million by yearend, Stockdale said.
“Consumers, [who] continue to embrace the Simon Giftcard, at the end of the day are the ones that vote on the product,” Stockdale said.
In September, Simon launched the Simon Pink Ribbon Giftcard in partnership with the Susan B. Komen Breast Cancer Foundation, where for every card purchased Simon donates $1 to the foundation.
Gift cards in general have come under scrutiny for their dormancy fees and expiration dates, which have generated numerous consumer complaints as shoppers head to the store to use their gift cards only to find they have expired or are no longer worth the face value. Dozens of states have enacted or introduced legal protections for consumers regarding gift cards.
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