New York AG Secures $4.4M Settlement Over Gift Card Fraud

New York Attorney General Letitia James announced Monday a $4.4 million settlement with Card Compliant LLC, a Kansas-based gift card company accused of helping fashion retailer H&M illegally retain millions in unredeemed gift card balances.

The agreement resolves allegations that Card Compliant violated New York law by assisting H&M in avoiding state reporting requirements for unclaimed funds. Under New York law, unredeemed gift card balances must be transferred to the state’s Abandoned Property Fund after five years of inactivity.

H&M, which sells gift cards for its retail and online stores, allegedly partnered with Card Compliant in 2009 to falsely portray that the gift card program was managed by the Kansas company, shielding the funds from state oversight. Attorney General James said the scheme allowed both companies to profit at the expense of New Yorkers.

“Consumers should know that when they buy gift cards, the money on the card belongs to them,” James said in a statement. “For years, Card Compliant and H&M knowingly broke the law and deceived the state and consumers, pocketing gift card funds that belonged to New Yorkers.”

The settlement follows a $36 million resolution with H&M in May 2022 related to the same allegations.

The investigation began in 2016 after a whistleblower filed a lawsuit under New York’s False Claims Act. Officials found that H&M and Card Compliant misled state authorities by claiming millions in gift card redemptions had been paid out, while H&M retained control of the program and unredeemed balances.

As part of the settlement, Card Compliant will pay $4.37 million to New York, including more than $1 million to the whistleblower.

The case was handled by Assistant Attorney General Laura Jereski of the Taxpayer Protection Bureau, with support from Senior Enforcement Counsel Bryan Kessler. The bureau operates within the Division for Economic Justice under Chief Deputy Attorney General Chris D’Angelo.