(WNY News Now) Attorney General Letitia James recovers millions for customers by holding Card Compliant LLC responsible for helping H&M get around New York’s gift card regulations.
NEW YORK In violation of New York law, New York Attorney General Letitia James today obtained nearly $4.4 million from Card Compliant LLC (Card Compliant), a gift card firm, for willfully assisting well-known fashion store H&M in keeping millions of dollars in unused gift card payments from New Yorkers. Unused balances on gift cards that New Yorkers should have been able to collect through the state’s Office of Unclaimed Funds were withheld by H&M for years. In order to provide the impression that Card Compliant, an out-of-state business, was managing H&M’s gift card business and was exempt from having to give the state the unredeemed sums, H&M entered into an arrangement with Card Compliant. In actuality, H&M kept running its own gift card company and was compelled by law to transfer any unused amounts. Attorney General James was able to collect about $36 million from H&M in May 2022 that the company had mistakenly withheld. Card Compliant will pay the state around $4.4 million as part of the settlement with the Office of the Attorney General (OAG) that was announced today.
Attorney General James stated that when consumers purchase gift cards, they should be aware that the funds on the card are theirs. Card Compliant and H&M lined their own coffers with gift card money that belongs to New Yorkers for years by willfully breaking the law and lying to the government and customers. My office will continue to defend the financial interests of New Yorkers and pursue any business that tries to defraud them.
Gift cards are available for purchase at H&M’s physical and virtual stores. A part of H&M’s gift cards are underused by customers each year, leaving an unredeemed amount on the cards that H&M has received but that customers haven’t utilized to purchase goods. Gift card issuers must transfer unused balances to New York’s Abandoned Property Fund in accordance with New York law after five years of inactivity.
After a whistleblower filed a case under the New York False Claims Act, the OAG launched an investigation into H&M in 2016. The inquiry revealed that H&M knew it had to transfer millions of dollars in unredeemed gift card balances to the Abandoned Property Fund, but failed to do so.
H&M signed a deal with Card Compliant to avoid giving over these monies, with the goal of making it appear as though Card Compliant, not H&M, was in charge of issuing and managing its gift cards. Since Card Compliant is based in Leawood, Kansas, it was exempt from having to send unclaimed amounts to the Office of Unclaimed Funds in New York.
Regarding the agreement between H&M and Card Compliant, the New York Comptroller’s Office got in touch with the retailer in 2011. Card Compliant suggested that H&M not publish the fee clauses that would have shown that H&M retained the balances on the unredeemed gift cards, instead only sharing a portion of the contract terms with the Comptroller’s Office. Additionally, Card Compliant wrote a letter to the Comptroller’s Officer in which it made a false assertion that the company had disbursed tens of millions of dollars in relation to redemptions of H&M gift cards. Actually, Card Compliant had not taken this action and lacked the funds necessary to redeem the millions of dollars in unpaid gift cards owed to H&M. Card Compliant falsely claimed to have handled the gift card issuance and marketing services and kept the unredeemed balances by making false representations to the Comptroller’s Office.
The deal reached today settles claims that Card Compliant gave the Comptroller’s office incorrect information and counseled H&M to do so in order to keep the state from receiving the unused balances on gift cards. Card Compliant has agreed to pay $4.37 million to the state of New York, with over $1 million going to the whistleblower.
Under the direction of Senior Enforcement Counsel Bryan Kessler, Assistant Attorney General Laura Jereski of the Taxpayer Protection Bureau oversaw the investigation. She was assisted by Legal Support Analyst Iuliia Belyshkina. The Division for Economic Justice, headed by Chief Deputy Attorney General Chris D. Angelo and First Deputy Attorney General Jennifer Levy, includes the Taxpayer Protection Bureau, which is headed by Bureau Chief Thomas Teige Carroll and Deputy Bureau Chief Scott J. Spiegelman.