New York Attorney General Letitia James announced last week a significant legal victory, securing nearly $4.4 million from Card Compliant LLC for its role in helping fashion retailer H&M unlawfully withhold millions of dollars in unused gift card funds. The settlement is part of a broader investigation that revealed H&M had kept millions of dollars from New Yorkers’ unredeemed gift card balances, violating New York State law.
H&M Hennes & Mauritz, L.P. (H&M LP) is a New York-based limited partnership, owned by the Swedish holding company H&M Hennes & Mauritz AB (H&M AB). The company operates H&M retail and online stores across the United States. In addition to selling clothing, H&M LP distributes gift cards for use in its stores, which do not have expiration dates. In 2016, H&M LP sold or distributed nearly $80 million in gift cards. Each year, a portion of these gift cards remain unused by consumers, leaving H&M LP with corresponding unclaimed balances.
For years, H&M withheld unused gift card balances that should have been turned over to New York’s Office of Unclaimed Funds (OUF), which is overseen by State Comptroller Thomas P. DiNapoli. The retailer had attempted to circumvent this requirement by entering into an agreement with Card Compliant, an out-of-state company, to manage its gift card business. This made it appear that the responsibility for handling H&M’s gift card balances rested with Card Compliant, which, as a non-New York entity, was not obligated to transfer the unredeemed funds to the state.
However, the investigation revealed that despite the appearance of a transfer of responsibility, H&M continued to control the gift card business and retained the funds. The company repeatedly misled the state, falsely claiming that Card Compliant had handled its gift card operations and that the unredeemed balances were not subject to New York’s unclaimed property laws.
Since at least June 2008, H&M Hennes & Mauritz, L.P. (H&M LP) was aware that New York’s Abandoned Property Law (APL) required it to transfer unused gift card balances to the state’s Abandoned Property Fund. However, H&M LP sought to avoid this by entering into a contract with an Ohio-based company, “Company A,” to make it appear that Company A, rather than H&M LP, was issuing the gift cards. Because Company A was based outside of New York, it was not obligated to transfer unused balances to the state. In May 2011, H&M LP falsely informed the state that its gift card liabilities had been transferred to Company A, omitting the fact that the unused balances remained in H&M LP’s accounts. Additionally, H&M LP misrepresented that Company A had paid out tens of millions of dollars in redemptions, when in fact, no such payments had been made.
“My office has zero tolerance for companies that disregard the law and line their pockets with money that belongs to hardworking people,” said Attorney General James. “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 H&M will pay millions of dollars for its wrongdoing.”
As part of the settlement, Card Compliant will pay nearly $4.4 million to New York State, compensating for its role in aiding H&M’s deceptive actions. Of this, more than $1 million will be awarded to the whistleblower who exposed the scheme. In May 2022, H&M had already agreed to pay over $36 million to resolve similar claims related to its gift card practices.
The state’s investigation began in 2016 after a whistleblower filed a lawsuit under the New York False Claims Act, which allows individuals to bring lawsuits on behalf of the state and share in any recovery. The OAG’s probe revealed that H&M was fully aware of its obligation to transfer unredeemed gift card balances to the Abandoned Property Fund after five years of inactivity, but intentionally avoided doing so.
H&M has agreed to pay $36 million to resolve claims related to its failure to transfer unused gift card balances to New York’s Abandoned Property Fund. The settlement includes two portions: $28.26 million for the state and $7.74 million for the whistleblower. Payments to the state will be made in installments over the next year, while the whistleblower will receive their share in the same timeframe.
In total, H&M will pay more than $28 million to settle claims related to the unredeemed balances, with over $18 million going directly to the state’s Abandoned Property Fund. New Yorkers with unused H&M gift card balances will now be able to claim their funds through the OUF.
The agreement also includes conditions to secure payments and stipulates that H&M cannot claim tax deductions for any portion of the settlement. In exchange for these payments, the state will release H&M from civil or administrative claims related to the case, though certain liabilities, including tax and criminal ones, are excluded. The whistleblower also releases the state from claims tied to this settlement but reserves the right to pursue future claims against other parties involved
“The Comptroller’s Office of Unclaimed Funds stands at the ready to assist those who have money coming to them,” said State Comptroller DiNapoli. “I thank Attorney General Letitia James and her office for their work to help my office hold companies accountable and ensure that unused gift card money goes to the consumer.”
The case highlights the importance of protecting consumer rights and ensuring companies adhere to state laws designed to safeguard unused gift card funds. Consumers are encouraged to check with the Office of Unclaimed Funds to see if they have any unclaimed balances from H&M gift cards.
“This case sends a clear message to companies: if you violate the law and keep money that belongs to consumers, you will be held accountable,” Attorney General James concluded. “My office will continue to protect New Yorkers’ wallets and ensure that unscrupulous companies do not profit from deceit.”
The settlement, which also holds Card Compliant accountable for its deceptive actions, reflects New York’s ongoing commitment to consumer protection and financial transparency.
H&M has faced a series of challenges in recent years. Despite global expansion over the past few decades, the retailer has been closing more physical stores and opening fewer, even as it begins to recover from pandemic-related shutdowns and the broader economic downturn.
In addition to these business struggles, in 2020 Fox Business reported, H&M was fined over $41 million for allegedly tracking the personal lives of hundreds of employees. Managers at the company’s customer service center in Nuremberg, Germany, were found to have kept detailed records on workers’ vacations, illnesses, religious beliefs, and family issues, dating back to at least 2014. This information, gathered through meetings and one-on-one conversations, was used to assess employees’ work performance and employment status. The German privacy watchdog, Hamburg Commissioner for Data Protection, described these practices as “particularly intensive interference” with employee rights, with the data sometimes accessible to as many as 50 managers. A “configuration error” in October 2019 exposed the data to the entire company, leading to the discovery of these practices.
H&M, which employs about 179,000 people globally, pledged to review the decision and provide “financial compensation” to anyone who worked at the Nuremberg center for at least a month since May 2018. In response, the company has taken steps to strengthen data privacy, including reshuffling management at the center and offering additional training for leaders. “The incident revealed practices for processing employees’ personal data that were not in line with H&M’s guidelines and instructions,” the company said in a statement, adding, “H&M takes full responsibility and wishes to make an unreserved apology to the employees at the service center in Nuremberg.”
