CONCORD, N.H. - State consumer protection laws don't apply to bank-issued gift cards sold by a shopping mall management company, a federal judge ruled Tuesday.
Indianapolis-based Simon Property Group Inc., sued New Hampshire, arguing that that its Simon Visa Giftcard is not subject to state law because it is issued by a bank and therefore falls under federal banking laws governing interstate commerce.
Attorney General Kelly Ayotte claimed that Simon violates a state law by deducting $2.50 a month from gift cards that had an unused balance after six months, and charging a $7.50 fee to reactivate an expired card.
Last year, the company settled a case in New York by agreeing to change some of its policies, but the new policies still conflicted with New Hampshire law, which prohibits expiration dates on gift certificates as well as service charges, dormancy fees or other administrative charges that reduce the value of the certificate.
"Overseeing the terms and conditions of the Simon Giftcard, as well as those of the contractual agreement between purchasers of the giftcard and the issuing bank, are matters for federal regulators," U.S. District Judge Steven McAuliffe wrote. "If there are to be any restrictions on fees associated with the giftcards, or limitations imposed on expiration dates, they must come either from Congress or the federal agencies empowered by Congress to oversee national banks and federal savings associations."
Simon said the giftcards are sold in 35 states at 159 malls and can be used at any location worldwide where Visa debit cards are accepted, including locations not affiliated with Simon's malls.
The state accused the company of violating the New Hampshire Consumer Protection Act, the company went to federal court in 2004 asking a judge to declare that the state law doesn't apply.
Simon Property Group is the nation's largest shopping mall chain, with properties in 40 states. It faces similar legal challenges in Massachusetts and Connecticut.