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As consumers lose millions to gift card scams, lawmakers pressure businesses

Robbie Sequeira, Stateline.org on

Published in News & Features

When Denise Brown peruses the tightly packed gift card display at her local CVS in Harlem, New York, she sees the perfect present for her grandson: a Sony PlayStation gift card.

Others, acting in bad faith, see these gift card displays as easy money in one of the country’s costliest and most common consumer scams: card draining.

Scammers drain a gift card by obtaining the bar code, CVV number, PIN number or activation code from beneath the slim cardboard packaging. They reseal the card, wait for a consumer to buy it and load it with money, and then spend the balance before the consumer can.

In 2023, card draining and other gift card-related fraud made up $217 million of the record-high $10 billion in money lost from scams nationwide, according to the latest data released by the Federal Trade Commission.

State attorneys general and legislatures are trying to combat gift card scams with consumer alerts, arrests and warning signs on store displays. Some are even telling gift card makers how to package their products. Retailers and card manufacturers, though, are pushing back — saying the micromanaging isn’t necessary and would hurt small businesses.

Gift cards, which are easy to find at almost any big box retailer, are a popular gift for holidays, birthdays and graduations. Scammers love gift cards because they’re money that can be easily moved, often irreversibly, with few protections for consumers, according to fraud specialists.

 

Maryland state Sen. Benjamin Kramer thinks new packaging requirements might help. He authored a bill that would require secure packaging to conceal the bar code and other information that could be used to activate it. Maryland lawmakers approved Kramer’s bill earlier this month and sent it to Democratic Gov. Wes Moore.

“Once they see these displays, con artists get all the numeric information off those gift cards and then put them back,” Kramer, a Democrat, told Stateline. “That’s the scam. Because then the consumer comes, puts $500 onto the gift card and it immediately gets drained by the scammer, who’s got all that information from when they pulled the gift card off the rack.”

Kramer said trying to legislate against ever-evolving frauds and scams is like a game of “Whac-A-Mole.”

“Scammers are always very creative in how they scheme to get their money,” he said. “This fraud is becoming more and more prevalent.”

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