Skelos And Fuschillo Request Attorney General Investigation Of Simon Group For Violating New Gift Card Law

Dear Attorney General Spitzer:

We respectfully request that you review, on behalf of the consumers of New York State, the legality of the "monthly fee" being charged to consumers who purchase Simon Visa gift cards. According to the Simon website, and administrative fee of $2.50 monthly is charged against the balance of the card beginning with the seventh month after issuance.

As you know, Chapter 171 of the Laws of 2004 amended the General Business Law to prohibit the assessment of service fees against the balance of a gift certificate prior to the thirteenth month of dormancy. While the administrative fee is waived by Simon for the first six months and fully disclosed, it seems to us a clear violation of the gift card law which went into effect in October of this year.

According to a December 12, 2004 Newsday article, Simon Property Group believes they are in compliance because the cards are issued by Bank of America and the fees are disclosed. While we recognize that the Simon cards are issued by a banking institution, we do not agree that they are necessarily exempt from the General Business provisions of New York State Law regarding gift certificates.

The electronic payment devices, sold by Simon and Bank of America, are not linked to a deposit account and do not extend credit to the holder beyond the amount that has been prepaid. Thus, the payment card can be transferred to another party, with whom the bank has no relationship other than to honor the payment for future goods or services in the amount already electronically transferred to the card. We would argue that these products are not specifically regulated under Federal law and that New York State law should be enforced.

A copy of the Newsday article and the terms and conditions set forth by Simon that appear on its website have been enclosed for your convenience. We appreciate your review of this matter and look forward to your reply.

Sincerely,
/s/
Dean G. Skelos
New York State Senator

/s/
Charles J. Fuschillo, Jr.
New York State Senator