updated 2/4/2005 4:45:08 PM ET 2005-02-04T21:45:08

New York Attorney General Eliot Spitzer is accusing the nation’s largest shopping mall owner of violating a new consumer protection law by charging administrative fees on prepaid gift cards.

Spitzer filed the first enforcement action of the state law through a civil suit against Indianapolis-based Simon Property Group Inc. The company operates 10 malls and shopping plazas statewide including the Walt Whitman Mall on Long Island and the Woodbury Common Premium Outlets in Orange County.

A 2004 New York law bans monthly service fees on gift cards until the card has been unused for 12 months. Simon Property charges a $2.50 monthly administrative fee on the cards beginning six months after it is issued, according to its Web site.

Spitzer also says a $5 replacement fee isn’t disclosed on the company’s card as required by the law.

“The gift card law was enacted to protect consumers against hidden and unwarranted fees that diminish the balance of gift cards,” Spitzer said Friday.

In a statement Friday, Simon Property said that, “based on the underlying facts and applicable legal standards,” it was confident its card was legal.

Massachusetts, New Hampshire and Connecticut had previously taken similar action against the company for allegedly violating state gift card laws. In November, a Simon Property spokesman argued that its gift card was not subject to state laws because it was issued by Bank of America Corp. and therefore fell under federal banking laws covering interstate commerce.

In January, Connecticut Treasurer Denise Nappier and Attorney General Richard Blumenthal said the federal Office of the Comptroller of the Currency had rejected Simon’s argument that it was exempt from state laws. The state’s lawsuit is pending.

California, Iowa, Louisiana, New Jersey, Rhode Island, Tennessee and Washington also have laws governing gift cards, according to the National Conference of State Legislatures.

According to the Simon Property Group Web site, customers can prepay from $20 to $500, plus $5.95 shipping and handling charges, and give the card as a gift. The $2.50 monthly administrative fee begins in the seventh month the card is issued, until the balance is zero. A customer whose card expires with a positive balance is charged $7.50 for a replacement.

If a New York court rules against the company, penalties could be up to $1,000 per violation — or each card issued — after Oct. 18 when the law was effective, said Spitzer spokeswoman Christine Pritchard.

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