Better Business Bureau study: scammers love gift cards

        Scams involving gift cards have increased tremendously, with hundreds of millions of dollars in losses over the last few years.
        An investigative study – “Gift Card Payment Scams: Why Scammers Love Gift Cards” – recently released by Better Business Bureau (BBB) looks at the scope of fraud involving gift cards as a payment method, the way various cards work, the scammers who exploit them, the efforts to combat the scams and the steps that the industry can take to further tackle this scourge.
        According to the study, payment by gift card is a common thread among many scams that have been the subject of previous BBB studies, including government impersonators, business email compromise frauds, tech support frauds, romance scams, fake check scams, prize/sweepstakes scams, and online sales of nonexistent vehicles.
        “If you’re asked to make payment via gift card for whatever reason, you almost certainly are dealing with a scam,” said BBB President Dick Eppstein “Gift cards don’t carry the same protections as credit or debit cards, so funds spent on gift cards are funds you cannot get back.”
        Available data suggests that gift card payment scams are growing fast. The losses reported to BBB Scam Tracker for this payment type nearly tripled between 2017 and 2020, with a median loss of $700 in 2020. Consumers over 65 were more likely to lose money than younger consumers.
        The Federal Trade Commission (FTC) reports that roughly one in four people who lost money to a scam not related to an online purchase paid with a gift card, with reported losses of $245 million since 2017 in complaints made directly to the FTC.
        A Bowling Green-area businessman got a phone call at 11:30 on Friday, Feb. 26 that his electricity was being cut off for nonpayment. He protested but was told the cutoff could only be prevented if he bought gift cards from a local store. He bought three cards totaling $ 1,372.52, called the scammers and read the card numbers to them over the phone (he said they had a foreign accent.)
        He was then called and told that his meter was being removed and he needed to buy another $1,500 in cards, which was a deposit he would get back.
        They called him a third time and got another $1,500. Only later did the business owner realize that these calls were scams. He ended up losing $ 4,372.
        A Springfield, Missouri, woman in her 80s received a call in November 2020 from someone who claimed to be with Apple and told her that her iCloud storage was compromised. The woman was instructed to buy gift cards in order to protect her data and tell any cashier who questioned the transaction that they were gifts for grandchildren. She subsequently purchased 29 $500 gift cards to Target and Walmart, scratching off the numbers on the back and photographing them with her phone. In total, the woman lost $14,500.
        Typically, when gift cards are requested as payment in scams, the scammer instructs the consumer to buy one or several gift cards and either read the numbers on the back over the phone or send a photo of the numbers on the back. If victims ask questions about why gift cards are being used for payment, scammers invent a plausible excuse, such as that the government has recently entered a contract with a gift card company to handle transactions.
        Commonly requested gift cards include eBay, Google Play, Target, iTunes, Amazon, and Steam, an online gaming company. The scammer might promise to reimburse the consumer later or may send a check in advance for the consumer to deposit. In reality, the funds never materialize or the check is invalid, and the consumer has lost the funds forever.
        Gift cards cannot be tracked easily and do not carry the same legal protections as credit or debit cards, making them an attractive option for scammers. While the FTC’s Telemarketing Sales Rule (TSR) has extensive provisions governing telemarketing – which prohibits the use of reloadable cards such as Green Dot cards – it does not currently prohibit the use of gift cards in telemarketing.
        Red flags to know and avoid include:
        • Government agencies requesting payment. No government agency requests money through gift cards.
        • Statements that buying gift cards is a safe way to make a payment. Providing the numbers for a gift card is like sending cash, and the money is rarely recoverable. Gift card payment requests are a big red flag for a scam.
        • Keep the receipt when buying a gift card. Keep the physical card as well. These may help prove that the card was paid for and activated if problems arise later.
        • Inspect the card carefully before buying it to be sure it has not been tampered with. Some scammers open the card to get the numbers on the back so that they can take the money when the card is later activated.
        Authorities have tried to crack down on scams that rely on gift card payments, including government impostor scams. Law enforcement has prosecuted so-called “money mules” who funnel the funds transferred via gift cards. In November 2020, a federal court in Tampa, Florida sentenced a man to more than five years in prison for laundering gift cards illegally obtained by scammers through an online redemption site he operated. State attorneys general have reached agreements with major retailers to make changes in their gift card policies aimed at stopping fraudulent purchases.
        In addition to telling consumers how to recognize and avoid gift card scams, the BBB study recommends the FTC should consider amending the Telemarketing Sales Rule to prohibit payment with gift cards and that the industry continue to alert the public about misuse of gift cards by fraudsters by:
        • Warning directly on the cards;
        • Warning on gift card display racks;
        • Training and educating front-line tellers and cashiers.
        If you are a victim of a credit cards scam:
        • Notify the issuer of the card as soon as you realize you bought gift cards and provided the numbers to scammers, or have purchased gift cards with no balance on them. There is typically a customer service number on the back of the card.
        • File a complaint with the local Better Business Bureau, or report a scam online at BBB.org/scamtracker.
        • File a complaint with the Federal Trade Commission (FTC) at reportfraud.ftc.gov or call 877-FTC-Help.
        • File a complaint online with the Internet Crime Complaint enter (IC3) at ic3.gov/complaint. This is a service operated by the FBI.
        • File a complaint with the Consumer Financial Protection Agency online at consumerfinance.gov/complaint or call 855-411-2372.
        • Report scams to the Ohio Attorney General’s office at https://www.ohioattorneygeneral.gov/About-AG/Contact/Report-A-Scam.
        For more details, email Richard Eppstein, president of the BBB serving NW Ohio and SE Michigan at dickep@toledobbb.org.
        Get free BBB text alerts on the latest scams by texting the word “start” to 95577.