Popular fashion retailer H&M has been ordered to pay $36 million after being caught illegally holding onto millions of dollars from unused gift cards. New York Attorney General Letitia James announced the recovery, stating that H&M had for years failed to transfer unspent balances on gift cards to the state’s Office of Unclaimed Funds, as legally required. Furthermore, the company repeatedly misled state authorities about its gift card practices, falsely claiming an external company managed the business. The settlement includes a penalty for H&M’s misconduct and the transfer of the owed funds to New York’s Abandoned Property Fund.
“My office has zero tolerance for companies that disregard the law and line their pockets with money that belongs to hardworking people,” stated Attorney General James. “H&M not only illegally kept unused gift card money that customers paid for but also lied about it to the state. Such behavior is unacceptable, and this settlement ensures H&M is held accountable for its actions. New Yorkers can be assured that my office will always protect consumers and ensure businesses operate within the law.”
Like many retailers, H&M issues gift cards for purchases in their physical and online stores. Customers use these gift cards to buy clothing and other items. However, a percentage of these gift cards remain unused, leaving a balance – money H&M has received but not yet provided goods or services for. New York law mandates that after five years of inactivity, companies must turn over these unredeemed gift card balances to the state’s Abandoned Property Fund, managed by Comptroller DiNapoli’s office.
The Attorney General’s Office (OAG) initiated an investigation into H&M following a whistleblower lawsuit under the New York False Claims Act. This act allows individuals to report misconduct on behalf of the government and receive a share of any recovered funds. The OAG investigation revealed that H&M was aware of its obligation to transfer millions in unredeemed gift card balances to the Abandoned Property Fund but knowingly failed to do so for several years. Instead, H&M actively concealed its non-compliance.
In 2008, after becoming aware of the requirement to transfer these funds, H&M entered into an agreement with an out-of-state company (referred to as Company A). This contract was designed to create a false impression that Company A was managing H&M’s gift card operations. However, Company A did not take over the gift card business; H&M continued to manage it internally. Crucially, the funds from gift card sales remained within H&M’s accounts.
H&M falsely informed the state that its gift card balances had been transferred to Company A. Despite this claim, H&M continued to hold millions of dollars in unredeemed gift card balances, manufacture and sell new gift cards, and remained responsible for honoring these cards. Furthermore, H&M facilitated the submission of a letter to the state that falsely stated Company A had “paid out tens of millions of dollars” on H&M gift cards, knowing that no such payments had occurred.
In November 2011, when the state again inquired about H&M’s gift card business, H&M once more provided false information. The state was told that H&M’s unused gift card balances were transferred to an out-of-state entity with no obligation to New York, while in reality, H&M retained these millions and remained liable for the gift cards.
The current agreement resolves allegations that H&M deliberately made false statements to Comptroller DiNapoli’s office to avoid surrendering unused gift card balances to the Abandoned Property Fund. As part of the settlement, H&M will pay over $28 million to the state, with over $18 million specifically designated for the Abandoned Property Fund to cover unredeemed balances on H&M gift cards sold before 2015. The whistleblower who brought H&M’s misconduct to light will receive $7.74 million.
Consumers who possess H&M gift cards issued between 2004 and 2014 with unused funds have options. If they still have the physical card, they can use it at H&M stores. Alternatively, they can file a claim with the Comptroller’s Office of Unclaimed Funds to recover the unredeemed balance. This settlement ensures that H&M is held accountable for its unlawful actions regarding H&M gift cards and provides a pathway for consumers to reclaim their due funds.
