Three States Sue Simon Malls over ‘Gift Card’ Charges

Three New England states have sued North America’s largest shopping mall owner, alleging that Simon Property Group Inc. violated consumer protection laws by including fees and expiration dates on its gift cards.

In a preemptive strike, Simon Property Group had sued Massachusetts, Connecticut and New Hampshire on Nov. 12 in anticipation of the Nov. 15 state suits. Simon said that its Simon Visa Gift Card 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.

“As a co-branded bank card, Simon is confident that the card is regulated by federal and not state law, which is at the heart of the lawsuits,” Simon spokesperson Michal Regunberg said.

Attorneys General from the three states filed suit in federal court claiming that Simon Malls illegally imposed a one-year expiration date on the gift cards and illegally charged consumers a number of fees.

According to the Connecticut complaint, the fees include a $2.50 monthly dormancy fee if the card is not used within six months; a .50 cent charge if the consumer calls a toll free number to learn the remaining value of the gift card for each call after the initial call; and a $5 “reissue” fee deducted from the value of the card if the card is lost or stolen and the consumer wants to have the card reissued.

“Simon illegally picks its customers’ pockets to reactivate cards with unused balances,” said Connecticut AG Richard Blumenthal in a statement. “Card purchasers intend to give a gift to friends or loved ones, not to an already wealthy mall owner. State law—as well as logic and fairness—demand that gift cards retain their value just like dollars in a drawer.”

Connecticut said the gift cards constitute “gift certificates” under the Connecticut Gift Card Law, which prohibits any type of dormancy or inactivity fees and the imposition of an expiration date on cards sold after Aug. 15, 2003. The state asked the court for a preliminary injunction barring Simon Property Group from selling its gift cards in the state, selling any gift cards with expiration dates, dormancy or inactivity fees and to pay civil penalties for each violation. Simon Property Group, which owns and operates malls and community shopping centers in 36 states around the country, operates the Crystal Mall in Waterford, CT, and others. There are 159 malls selling Simon Visa Gift Cards in 35 states.

Simon Property said that its card carries fees to offset costs required to maintain the account, to ensure consumers are protected against fraud and unauthorized use and to process each transaction. It said that it “makes every effort” to educate customers and to ensure that they understand the terms of the gift card before they purchase one.

Massachusetts law states that gift cards be redeemable at full face value for seven years.

“These ‘gift cards’ are riddled with additional charges that Massachusetts consumers should not have to pay,” AG Tom Reilly said in a statement. “Despite the name, these gift cards are not what they seem.”

He said that a Simon Gift Card with a $25 face value is worth only $12.50 after the eleventh month, and would be worth nothing after one year.

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.

“Simon Property Group decided to take this action reluctantly and only after it became apparent that, with the holiday shopping season upon us, we had to take steps to make sure that consumers had the ability to purchase these popular gift cards,” the company said in a statement.