WASHINGTON, DC ( release ) United States Senator Charles E. Schumer warned Christmas shoppers Sunday to be aware of gift card scams that could result in the cards having zero balances on them by the time they are opened on Christmas morning.
Gift cards for dozens upon dozens of retailers are now readily available for purchase at drug and convenience stores and displayed on easily accessible shelves, making account information on the back of the cards available to would be scammers. Scammers are able to obtain account information from the back of cards, wait for the cards to be activated upon purchase, and then use them online before the intended recipient ever gets the gift card on Christmas morning. Schumer is warning last minute Christmas shoppers to pay particular attention to any tampering of gift cards and asking retailers to consider displaying gift cards in more secure locations or behind the counter.
“Gift cards are wildly popular gift options and stocking stuffers for Christmas,” said Schumer. “The last thing we want is for someone on Christmas morning to be excited about their gift only to find out days later that some scammer has already used the card, leaving you with a worthless piece of plastic. The bottom line is we need to better protect gift cards for consumers, because the system all too many stores use now is a free buffet for scammers and crooks that can leave unsuspecting victims with a valueless piece of plastic by Christmas Day.”
Schumer noted that with the growing availability and accessibility of retail gift cards at drug and convenience stores, scammers have identified ways of stealing account information from the back of cards in order to use the card long before the recipient opens the gift on Christmas morning or has an opportunity to use it at the store.
Each card has an account number on the back of it, which allows consumers to use the cards online when they are shopping. In addition to the account number, many cards have small access codes or pin numbers that consumers must enter when they shop online. In most cases, account numbers themselves are exposed when cards are on the shelf, while access codes and pin numbers are concealed with a scratch-off film. While some gift cards are fully packaged in cardboard and must be torn to gain access to the card, most allow easy access to the reverse side of the card allowing scammers to copy the account number and scratch-off access codes.
Once the card is legitimately purchased by a consumer, and activated at the register at the point of sale, scammers can use the account information they previously obtained from the store shelf and make purchases online, wiping out the balance. Scammers simply wait for the gift card to be legitimately purchased, and by periodically trying to use the card online, they can figure out when it’s been activated for use. Because most cards are bought as gifts and not opened or used until after Christmas, consumers are unaware their card has a zero balance until after they try and redeem it, sometimes weeks after the holidays.
While retailers use scratch-off film to conceal the access code and some package the card in cardboard, most consumers never check the back of a gift card before they decide to purchase one. Schumer noted that there is no uniform packaging for gift cards so it is important for consumers to inspect the card before they purchase it. For example, GAP, Banana Republic, and Old Navy simply affix gift cards to a small cardboard backing with a rubber adhesive, allowing easy access to the account number and access code window on the back, without having to tear packaging. iTunes gift cards have no packaging at all and while they have no access code or pin numbers, they conceal the account number with a scratch-off film. Best Buy gift cards are fully packaged in cardboard, but have an open window on the back that displays the account number. In order to obtain the pin number, the packaging must be opened at the bottom of the card.
Schumer is urging shoppers this holiday season to carefully inspect the packaging and security features of the gift cards before they purchase them. He noted most consumers never bother to inspect the back of a gift card before they purchase it. He also called on the National Retail Federation and Retail Gift Card Association to consider greater security measures to protect cards from scammers and tampering, like selling the cards behind the counter, or in casings that don’t allow easy access.
TowerGroup, a major research firm focused on financial services estimates that gift card transactions in 2011 will top $100 billion and will grow another 25% by 2014. Gift cards have rapidly grown in popularity as a less informal gift than cash, but giving recipients the flexibility of choosing a gift that is best for them. According to the National Retailer Association, 57% of people surveyed said they would like to receive a gift card this holiday season.
“Christmas is a time for giving, but unfortunately there are too many individuals this holiday season who are interested in taking,” continued Schumer. “Consumers should keep a watchful eye on the gift cards they are purchasing to ensure they haven’t been tampered with and retailers should work to make gift cards more secure from potential scammers.”
A copy of Schumer’s letter to the National Retail Federation and Retail Gift Card Association can be found below.
December 18, 2011
President and CEO
National Retail Federation
325 7th Street, NW Suite 1100
Washington, DC 20004
President and Executive Director
Retail Gift Card Association
9200 S. Dadeland Ave., Ste. 705
Miami Florida 33156
Dear Mr. Shay and Ms. Rea:
I write today to bring your attention to a disturbing phenomenon this holiday season that is threatening to harm American consumers—gift card theft and fraud.
Recent news stories have reported that there is a disturbing trend of gift-card theft where thieves go to stores such as Duane Reade, CVS, etc., and either electronically swipe or write down exposed gift card numbers, monitor them online and, when activated, quickly access and drain the card before the owner becomes aware of it.
Once the owner reports that his or her card value has been stolen, there is often nothing that can be done to restore the lost value of the owner’s card. This type of theft is an incredibly disheartening experience for both the purchaser and the recipient of a gift card—and can ruin joyous occasions such as holidays, birthdays, weddings, and graduations.
Fortunately, there are measures retailers and card-makers can immediately take to dramatically lessen the chance for this type of fraud to occur. For instance, retailers can sell these cards behind the counter, or behind secure glass dispensers, so that would-be-thieves are less likely to have access to these cards. In addition, cards can be better protected and packaged so that individuals can only access the card numbers after they have been properly purchased. In addition, retailers can do a better job of warning consumers to examine gift cards for tampering prior to purchase.
I respectfully ask each of you to instruct your members to take the steps necessary to eliminate this type of gift card fraud. Retailers who sell gift cards should take any and all security measures necessary to prevent the general public from stealing gift card numbers. By the same token, card-makers should develop systems and packaging methods to make gift cards less susceptible to theft by making the cards more difficult to access before they are lawfully purchased.
I thank you for your attention to this important matter, and look forward to working with you to protect the value of gift cards purchased by American consumers.