Mall coughs up quarter-million-dollars for bogus gift-card fees[SIZE=-1]
The agreement, which settles allegations by the Attorney General?s Office, Treasurer, and Department of Consumer Protection that Simon violated the state ban on gift card inactivity fees, could result in restitution of from $2.50 to about $50 to thousands of consumers who bought or received a gift card to the Crystal Mall in Waterford between Aug. 16, 2003 and Jan. 31, 2005.
Attorney General Richard Blumenthal said that Simon collected 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 customers that they are eligible to apply for full restitution. The signs instruct consumers to contact Blumenthal's office at 860-808-5420 to obtain claim forms. The notices will remain posted through Feb. 2. Consumers have until April 3 to submit a claim.
That?s the good news. The bad news is that Simon is now issuing gift cards through two national banks, MetaBank and U.S. Bank, to circumvent Connecticut's ban on dormancy fees, Blumenthal contends. Because they are national banks, their cards are governed by Federal law, which allows such fees. Simon is currently charging $2.50 a month on cards 13 months and older.
?While this restitution is welcome and significant, 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.?
Blumenthal called for closing the national bank legal loophole, so that unfair restrictions, such as expiration dates, as well as fees are stopped, no matter which entity issues the cards. He said he would seek legislation requiring retailers who use national banks to 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,? he said.
We e-mailed Simon for a response to the settlement, including an explanation for the company?s decision to have their gift cards issued through a national bank. We?ll post the company?s comments, if we receive a response.
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