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As the holiday season swings into gear, three retailers have changed their gift card policies in order to crack down on scams..
PLATTSBURGH | As the holiday season ramps into high gear, authorities are urging consumers to be wary of gift card scams.
Twenty-six percent of victims who reported scams between January and September 2018 paid with gift cards, according to the Federal Trade Commission.
That’s compared to only 7 percent in 2015, marking a 270 percent increase, said the New York State Attorney General’s Office.
Scammers often impersonate family members, law enforcement officials or tech companies directing victims to purchase thousands in gift cards and demand payment.
In the “grandparent scam,” the caller impersonates a grandchild, claiming they’ve been arrested and need funds for legal fees paid through gift cards.
“Once a consumer falls victim to the scheme, the scammer often continues to call the victim demanding more money in gift cards, resulting in large losses to consumers,” according to the attorney general’s office.
The scammer then uses the gift cards to purchase third-party gift cards such as iTunes, Steam or Google Play which are often resold on the black market.
Seniors are particularly at risk, authorities said.
One New York resident reported losing $36,000 as the result of a grandparent scam, said the attorney general’s office.
After providing the numbers on the backs of the cards, victims are ordered to destroy them, which prevents consumers from asking the retailer to freeze the cards, authorities said.
RETAILER REFORMS
As a result of the uptick, the state Attorney General’s Office has partnered with the Pennsylvania Attorney General’s Office and three major retailers to reform their policies.
Target, Best Buy and Walmart have reduced the total amount that a consumer can purchase in a single transaction in store-branded gift cards.
The retailers have also reduced the maximum dollar amounts that can be loaded on store-branded gift cards, as well as placed restrictions on redemption of the cards for others.
Walmart, for instance, has dropped its $5,000 limit on gift card purchases to $1,000.
The retailers have also boosted training to help employees identify the warning signs of scams and warn potential victims when appropriate.
“With gift card scams on the rise, these changes will help provide critical new protections to New Yorkers and consumers across the country,” said New York State Attorney General Barbara Underwood in a statement.
Underwood said she’ll continue to press additional retailers to make changes.
Pennsylvania Attorney General Josh Shapiro said this level of change in corporate behavior usually requires years of investigations and, sometimes, litigation.
“Here, we were able to work constructively with retailers to address the issue and protect consumers from scams,” Shapiro said in a statement.
IDENTITY THEFT
The rise of online shopping has also led to an increase in identity theft, fraud and abuse by cyber criminals, according to the New York State Division of Consumer Protection.
Identity theft complaints during the holiday season rose 9 percent between 2016 and 2017, leading to a total loss of over $88 million.
Authorities are asking online shoppers to be vigilant during the holiday season.
Consumers are urged to be wary of fake websites, safeguard personal information while shopping online and avoid using public computers or wi-fi when making purchases or conducting online banking.
“Criminals will look for every opportunity to steal and take advantage of their victims,” said New York State Police Superintendent George P. Beach II in a statement. “The commonsense steps are the ones that will protect you from becoming a victim. Being alert and taking the appropriate precautions will help to keep you safe this holiday shopping season.”
READ THE FINE PRINT
Authorities are also reminding shoppers to read the fine print when purchasing gift cards for details on fees and expiration dates.
While some gift card sellers have eliminated inactivity fees, consumers should still ask whether fees apply when purchasing a gift card, said New York State Comptroller Thomas P. DiNapoli.
Gift cards should be used within a year of purchase to avoid inactivity fees, he said.
Consumers are also encouraged to register their cards with the retailers.
Money from unused cards issued by New York businesses is turned over to the comptroller’s office as abandoned property after five years of dormancy.
By registering, owners can be identified which improves the opportunity of finding and claiming unused card balances.
The comptroller’s office received nearly $12 million from dormant gift cards last year, DiNapoli said.
COMMON GIFT CARD SCAMS
Gift cards cannot be used to pay bail, a lawyer, the IRS, or tech support.
“If someone demands to be paid with a gift card, it’s a scam,” said the state Attorney General’s Office.
Consumers are urged to never give gift card numbers on the back of gift cards to unknown parties.
Shoppers should be advised the IRS does not initiate contact with a consumer over a tax debt by phone, but through official mail.
“A big red flag for these scams are angry, threatening calls from people who say they are the IRS, urging immediate payment,” according to the state Attorney General’s Office.
Common gift card scams include:
Grandparent Scam: The scammer impersonates a grandchild of the victim who claims to be in some sort of trouble, typically related to a car accident or arrest, and in need of money to pay for bail or a lawyer. Victims report that the scheme was believable because the scammers knew the names and other information about their grandchild and sounded like their grandchild.
IRS Scam: The scammer impersonates someone from the IRS attempting to collect taxes allegedly owed. The scammer usually threatens arrest that day if the debt is not paid immediately via gift cards. Again, the victims report that the scheme is believable because the scammers may give the name and badge number of a real IRS agent whose identity can be verified online, the scammers may know detailed information about the victim’s tax history, or the scammers may send the victim an email that appears to be from an IRS domain.
Tech Support Scam: The scammer impersonates a tech support employee claiming to work for the manufacturer of the victim’s computer. The scammer claims there is a virus and requests remote access to the victim’s computer. After the scammer “fixes” a non-existent problem, he or she demands payment for the services and refuses to unlock the computer until the victim pays.
“Scammers also often train their victims to give false information to retail clerks who may question a large gift card purchase.”
If you discover that a loved one has fallen prey to a gift card scam, immediately contact the retailer where the cards were purchased to see if the retailer can freeze any funds remaining on the card.
Consumers should also contact the New York State Office of the Attorney General by filing a complaint online or calling 1-800-771-7755.
— Source: New York State Attorney General’s Office
