Card Compliant must pay $4.4M settlement in H&M gift-card case

A gift card company must pay nearly $4.4 million to settle allegations by New York’s attorney general that it helped fashion giant H&M illegally withhold millions of customer dollars on unused gift cards.

The money on those gift cards should have gone to the state’s Abandoned Property Fund to be reclaimed by the people who owned it, prosecutors said in a news release Friday. Instead, they alleged, H&M held onto the cash for years. It did so, prosecutors said, by using an agreement with Card Compliant — based in Leawood, Kansas — that made it seem as if the company was administering H&M’s gift card business. Card Compliant’s Kansas base was key because, as an out-of-state company, it was not required to transfer the money to the fund.

“For years, Card Compliant and H&M knowingly disregarded the law and lied to the state and to consumers, lining their own pockets with gift card funds that belonged to New Yorkers,” Attorney General Letitia James said.

In an email Friday, a Card Compliant spokesman said the company was pleased to have resolved the matter. H&M did not respond to a request for comment Friday.

Attorney Dan Miller represented William S. French, the whistleblower who brought the matter to the state’s attention. Miller said in a statement Friday, “I am very proud of this case. To my knowledge, this is the most successful qui tam whistleblower escheat action in the history of the United States.”

The attorney general’s Office said in its release Friday that the whistleblower would receive more than $1 million of the settlement with Card Compliant

In 2022, Sweden-based H&M, which has five stores on Long Island, paid $36 million to settle its role in the matter. At the time, state officials said H&M "repeatedly lied" to the state about the failure to transfer the unused gift card balances.

In a statement that year, a company spokesperson said the retailer disagreed with “characterizations concerning our alleged contact” but had cooperated with prosecutors and that gift card funds had always belonged to its customers. H&M's stock plunged as it reported a drop in sales over the 2023 holiday shopping season, and the company's top executive stepped down in January.

Prosecutors said Friday that Card Compliant’s role dated to at least 2011, when the state comptroller’s office contacted the retailer about its contract with the Kansas company.

At that time, prosecutors said, Card Compliant advised H&M to only share some of the contract terms and not to disclose fee provisions that would have revealed that H&M kept the unredeemed gift card balances. Card Compliant also prepared a letter for the comptroller’s office falsely claiming that the company had paid out tens of millions of dollars in connection with H&M gift card redemptions.

Prosecutors said that was false and that Card Compliant did not have the resources to honor the balances on the gift cards.

The global gift card market was valued at $984.3 billion in 2023 and is expected to reach $3.09 trillion by 2030, according to Capital One. According to the bank, 43% of Americans have unused gift cards. The value of these unspent funds is around $23 billion.

With The Associated Press