Policy Changes Resulted from a Collaborative Effort Between the Retailers and the Attorney General’s Bureau of Consumer Protection
PITTSBURGH PA (November 2018)-- – With the holiday shopping season officially beginning this week, Attorney General Josh Shapiro today announced a major victory in his continuing effort to prevent gift card scams targeting consumers.
Following more than a year of collaboration with the Attorney General’s Bureau of Consumer Protection and the New York Attorney General Barbara Underwood’s Bureau of Consumer Frauds & Protection, three national retailers have agreed to make major changes to their gift card policies, which are intended to prevent gift cards sold in their stores from being used for payment by victims of scams. Walmart, Target, and Best Buy made these changes voluntarily thanks to the joint initiative of Pennsylvania and New York.
“I am proud to announce this victory for Pennsylvania consumers and consumers across the nation as we gear up for the biggest retail shopping day of the year,” said Attorney General Shapiro. “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.”
Attorney General Shapiro recognized the important contributions of the New York Bureau of Consumer Frauds & Protection, which was involved in conversations with the retailers.
“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 Attorney General Barbara D. Underwood. “By working collaboratively with these retailers, we’ve created a way for businesses to take proactive steps to prevent scams. I urge other retailers to follow their lead as we continue to tackle the ever-changing threats posed by scam artists.”
“Walmart is pleased to support the Attorney General on this important initiative and the protections it offers citizens of Pennsylvania. We care about our customers and are continuously working to further enhance our gift card program to help guard against these types of crimes,” said Jason Klipa, Director of Public Affairs, Walmart.
Gift card scams have been increasing rapidly in recent years. The Federal Trade Commission recently found that 26% of scam victims paid with a gift card between January and September 2018, compared to only 7% in 2015 – a 270% increase.
Although there are many types of gift card scams, the most common are:
- Grandparent Scam – The scammer impersonates a grandchild of the victim who claims to have been arrested and in need of money to pay for bail or a lawyer, paid in the form of retail gift cards. Victims report that the scheme was believable because the scammer knew the name of and sounded like the victim’s grandchild.
- IRS Scam – The scammer impersonates someone from the IRS attempting the collect taxes owed. The scammer usually threatens arrest that day if the debt is not paid immediately via gift cards. Again, victims report that the scheme is believable because the scammer may give the name and badge number of a real IRS agent whose identity can be verified online, may know detailed information about the victim’s tax history, or 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.
With all types of gift card fraud, the scammer ultimately demands payment in the form of high-value gift cards and instructs the victim to read the numbers on the back of the gift cards over the phone. The scammer then uses the gift cards almost immediately – often to purchase third-party gift cards such as iTunes, Steam, or Google Play. This makes it very unlikely that a victim will be able to get any money back. 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. For example, one Pennsylvania resident lost $31,000 as the result of a grandparent scam; another lost $28,000.
After receiving numerous complaints about these scams, Bureau of Consumer Protection Agents contacted Walmart, Target and Best Buy to share victims’ stories and engage in collaborative discussions about changes that retailers could make to better protect consumers. Although the policy changes adopted by each retailer vary to some degree, the most common changes are:
- Reduction in Gift Card Limits – Retailers have significantly reduced both the monetary limit that can be placed on an individual gift card and the total amount that can be loaded onto gift cards during the same transaction.
- Restrictions on Redemption of Retail Gift Cards for Other Gift Cards – Retailers placed new restrictions on the redemption of their retail gift cards for third party cards such as iTunes, Steam, or Google Play. Scammers often use the proceeds of fraud to purchase these third party cards because they can be resold on the black market.
- Enhanced Employee Training – Retailers have committed to enhancing employee training to help their employees identify the warning signs of gift card scams and warn potential victims when appropriate.
Although progress has been made on this issue, gift card scams remain a threat to consumers across the country. The Office of Attorney General will continue to collaborate with other state Attorneys General and retailers on this initiative to reduce scams and fraud. Accordingly, the public should be aware of the following:
- You cannot pay bail, a lawyer, the IRS, or tech support using retail gift cards. If someone demands to be paid with a gift card, it’s a scam.
- Never give gift card numbers on the back of gift cards to someone you don’t know.
- Taxpayers should remember their first contact with the IRS will never be a call from out of the blue, 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.
- If someone who sounds like a loved one calls you claiming to be in trouble and demands payment, hang up the phone and call your loved one’s cell phone.
- In general, it’s a good idea to ignore phone calls if you don’t recognize the number. If it’s someone you know, they will leave a voicemail or send you a text.
- Scammers often train their victims to give false information to retail clerks when clerks ask questions about large gift card purchases. If a retail clerk warns you that you may be the victim of a gift card scam, heed the advice of the cashiers and call your loved one, or call law enforcement officials.
- Consumers who are victims of an attempted or successful scam should submit a complaint to the Bureau of Consumer Protection by calling 1-800-441-2555, emailing firstname.lastname@example.org(in Spanish: email@example.com) or visiting attorneygeneral.gov/submit-a-complaint/scams-complaint/
Since 2017, the Bureau of Consumer Protection has received complaints from at least 54 consumers about gift card scams, with these victims losing about $411,000. Bureau of Consumer Protection Director Sarah Frasch, Assistant Director for Financial Consumer Protect Nicholas Smyth, and Deputy Attorney General Jill Ambrose led the work on this initiative.