WASHINGTON - The Office of the Comptroller of the Currency has taken the unusual step of siding with three states in a preemption case.
Even more unusual is the type of company claiming protection from state laws: a large operator of shopping malls.
Though the case is quirky, it could attract close attention from the financial industry, because it involves some hot topics - consumer protections for gift cards and arrangements between banks and third parties.
The attorneys general of Massachusetts, Connecticut, and New Hampshire filed lawsuits in their respective state courts Monday against Simon Property Group Inc., which operates 159 malls throughout the country. The attorneys general say Simon sold stored-value gift cards that violate state bans against expiration dates and certain fees for such cards.
After it was notified that the states were poised to sue, Simon filed lawsuits Friday in various federal courts to let it continue issuing the cards while the state suits proceed.
Simon issues stored-value gift cards at its malls and on its Web site in conjunction with Bank of America Corp. The cards can be used anywhere where Visa cards are accepted. They have an issue fee of $5.95 to $6.95, a $2.50 monthly dormancy fee assessed starting six months after issuance, and a 50-cent balance-inquiry fee after the first inquiry.
Simon contends that the cards are shielded from state laws because a national bank issues them.
The attorneys general and the OCC contend that B of A does not really issue the cards and that the preemption argument does not apply.
"We are aware of the Simon malls' gift-card product," an OCC spokesman said Tuesday. "We have no plans to take the position that the Simon malls' gift card is a bank product in this litigation about whether state laws may apply."
David Rienzo, New Hampshire's assistant attorney general, said, "The salient fact in this particular matter is this does not appear, to us, to be a banking transaction."
Massachusetts Assistant Attorney General Pam Kogut said Simon's court filings have not persuaded the states that Bank of America issues the cards.
"This is really a mall-issued card," she said. "They wanted B of A's participation in order that they could have the Visa logo on it."
Mr. Rienzo said banks do not sell gift certificates. The products that banks offer - stored-value cards, debit cards, credit cards - are offered at a bank branch, and a transaction made at a teller window carries a different perception than one made at a mall's customer service desk, he said.
"There's a huge difference in perception, and quite frankly again, since this is not being sold by the bank, it is being sold by the shopping center, we feel that our law applies," Mr. Rienzo said.
A Bank of America spokeswoman would not give the Charlotte company's view of the case.
Nancy Wilsker, a partner at the Boston firm Brown Rudnick Berlack Israels LLP, who is representing Simon, said it firmly believes the card is bank-issued.
The product resembles a co-branded credit card, she said. "It's exactly the same card you would get if you went to B of A's Web site."
Because the card has the Visa logo, only a bank member of the Visa network can issue it, Ms. Wilsker said.
Visa officials agreed.
"The Simon Mall Gift card is a co-branded, bank-issued card subject to all Visa operating rules and regulations," Rhonda Bentz, a Visa vice president, said in a news release.
There are lots of cards similar to Simon's that the states have not attacked, she said.
New Hampshire and Massachusetts officials said they had received consumer complaints, which prompted the investigation and litigation.
Ms. Wilsker also said the OCC's statement did not mean it had sided with the states.
The OCC did not say "that this is not a bank-issued card," she said. "That's a statement that they don't want to get involved in this litigation."
Private citizens have brought similar suits against Simon in New York and California, and those suits were dismissed, Ms. Wilsker said.
