Simon Property Settles with NY; to Pay $125,000 in Penalties
Simon Property Group, Inc. has 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 last month over Simon’s fees on its gift card.
The state had charged that fees attached to the Simon Visa Giftcard violated a recently enacted state law.
“This settlement recognizes that consumers are entitled to receive the full protection of the law with regard to monthly fees and important disclosures about gift card terms and conditions,” NY AG Eliot Spitzer said yesterday in a statement.
Simon said the agreement was voluntary.
“The consent agreement provides for a quick and effective resolution of this matter,” said Stewart Stockdale, CMO of Simon Property Group and president of Simon Brand Ventures, in a statement. “We believe that the company has complied with all applicable laws.
Simon agreed to comply with a new law governing gift cards in New York and to not access a service fee on any card unless it has been unused for 12 consecutive months. Simon said that no administrative fees had been charged since Oct. 18, the date the new state law took effect.
The lawsuit, filed Feb. 2 in Manhattan State Supreme Court, alleged that Simon’s assessment of a monthly administrative fee on cards purchased after Oct. 18 violates the state law that bans monthly service fees on gift cards until the card has been unused for 12 months. The state said that Simon charged, among a number of fees, a $2.50 monthly “administrative” fee commencing in the seventh month after purchase.
The state also claimed that Simon violated another provision of the law by assessing a $5 fee to replace a lost or stolen gift card without conspicuously disclosing that fee on the card. As part of the settlement, Simon agreed to disclose the $5 fee it charges to replace a lost or stolen card and the $7.50 fee it charges to reissue an expired card, the state said.
Simon also agreed to pay $100,000 to the state in penalties and $25,000 for legal costs.
Simon Property Group operates 10 retail shopping malls and outlet centers in New York. Calls to Simon were not returned.
In addressing a flurry of consumer complaints and legislative action, as of March 1, 2005, Simon instituted other changes to its gift card program including extending the card’s expiration date from 12 to 18 months; eliminating the 50 cent charge for calls to the customer service line and the addition of an adhesive label tot he front of the card that spells out any charges associated with the card.
Legal problems, however, are not over yet for the mall operator and its gift card.
In December, Georgia Gov. Roy Barnes filed a lawsuit representing two Georgia shoppers claiming fees and expiration dates on the Simon gift cards are illegal. That lawsuit seeks class-action status. And in November, three New England states—Massachusetts, Connecticut and New Hampshire—sued Simon over dormancy fees and expiration dates on the gift cards.
Simon has claimed that its Simon 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. It was launched nationwide in 2003. In 2004, 6.3 million cards were sold at a value of more than $400 million, Simon said.
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. More than 25 states have enacted or introduced similar legal protections for consumers regarding gift cards.
