NY recovers $36M from H&M over unused gift cards

The New York Attorney General's Office has recovered $36 million in a settlement with fashion retailer H&M — money, Attorney General Letitia James said Thursday, that was unlawfully withheld from consumers who had unused gift cards.

As part of the settlement, the attorney general's office said H&M would pay more than $28 million to the state, with more than $18 million of that going into the Abandoned Property Fund for "unredeemed balances" on H&M gifts cards sold before 2015. A whistleblower will receive $7.74 million for bringing the misconduct to light, the attorney general's office said in a statement.

“My office has zero tolerance for companies that disregard the law and line their pockets with money that belongs to hardworking people,” James said in that statement. “For years, ​not only did H&M illegally keep unused gift card money that ​customers paid for, ​but they then lied about it to the state. Violating the law is not trendy or tolerable, and today H&M will pay millions of dollars for its wrongdoing."

New York officials said H&M "repeatedly lied" to the state about the failure to transfer the unused gift card balances, falsely claiming that an out-of-state company was handling the gift card business.

Officials said H&M sold the gift cards for use online and in its stores. However, like many such cards, balances often go unused by consumers. After five years of inactivity, those unused balances are supposed to be transferred to the Abandoned Property Fund. But officials said an investigation by the attorney general's office found that, although H&M "knew that it was required to transfer millions of dollars in unredeemed gift card balances," it did not — and "concealed" that failure from the state.

Officials said after H&M became aware in 2008 that it would have to transfer the balances, the retailer instead entered into a contract with an unnamed out-of-state company. That move gave what the attorney general's office called "the false impression" that the unnamed company was conducting the gift card business. In fact, the attorney general's office said, the money from the sale of gift cards never left the H&M accounts, which meant it retained "millions of dollars" in unredeemed balances.

In a statement, an H&M spokesperson said, "While we disagree with many of the characterizations concerning our alleged conduct, H&M cooperated with the New York State Office of the Attorney General during the course of its investigation and has agreed to resolve this matter. All funds received from gift card sales have always belonged to our customers for their personal use. No H&M customer gift cards have or will be impacted by this settlement, as H&M has and will continue to offer gift cards without expiration dates."

State Comptroller Thomas P. DiNapoli said New Yorkers with unused balances on their H&M gift cards could now recover their money — and that the Comptroller’s Office of Unclaimed Funds would assist in those recoveries.

By John Valenti

john.valenti@newsday.com

John Valenti, a reporter at Newsday since 1981, has been honored nationally by the Associated Press and Society of the Silurians for investigative, enterprise and breaking news reporting, as well as column writing, and is the author of “Swee'pea,” a book about former New York playground basketball star Lloyd Daniels. Valenti is featured in the Emmy Award-winning ESPN 30-for-30 film “Big Shot.”