As another holiday season kicks into high gear, consumer watchdogs are urging both retailers and the public to be on the lookout for gift card scams that could ruin the holidays for victims.
These scams are often carried out over the phone or online, targeting the elderly and others who can easily fall victim to what appears to be an urgent call for help from a friend or relative who needs money.
Scammers don’t have to receive gift cards to commit fraud. Instead, they often try to convince victims to purchase a gift card or cards and share the codes and identification numbers or PINs that convey — and use — their cash value.
New Jersey passed a law earlier this year requiring stores that display gift cards for sale to train employees on how to detect and respond to fraud.
A smart employee notices the scam
The law was inspired by an incident in New Jersey several years ago, according to the law’s authors. It involved an employee at a major drug store who recognized the telltale signs of gift card fraud and was able to prevent an elderly customer from providing key information to the scammer, potentially saving the customer thousands of dollars.
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Overall, losses related to gift card fraud have more than doubled in recent years, according to the Federal Trade Commission. Around this time last year, the FTC reported that nearly $150 million was lost to gift card fraud in just nine months.
These mounting losses only heighten the need for increased consumer and retailer awareness, especially during the holidays when prepaid gift cards are often purchased and exchanged as gifts.
“Scammers want you to pay with gift cards because they’re like cash: When you use a gift card, the money on it disappears,” according to a recent FTC press release.
To avoid falling prey to gift card scams, the FTC urges consumers to be cautious about calling if someone thinks something terrible will happen to a friend or relative if you don’t take quick action. Scammers may also ask you to purchase gift cards at a specific store, such as CVS, Target, or Walmart.
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From there, the caller typically requests a gift card number and a “PIN” that unlocks any money loaded onto the card.
“Don’t give them those numbers,” warns the FTC. “This is a fraud. You will lose your money and you will not be able to get it back.’
Earlier this year, the New Jersey Division of Consumer Affairs issued a new warning to consumers and guidance to retailers so they can train employees to recognize the signs that a consumer may be a victim of gift card fraud.
Guide to Fraud Detection
“The best tool we have to fight gift card scammers is widespread awareness of how they work and how to stop them,” state Attorney General Matthew Platkin said in a news release issued along with the consumer alert.
According to the Division of Consumer Affairs, common forms of gift card fraud include:
- Fraud of government institutions — Someone claiming to be a government agency demands payment in the form of gift cards to avoid arrest, get welfare, or pay a fine to keep your Social Security number from being frozen.
- Utility fraud — Fraudsters from housing and communal services claim that services will be turned off if payment is not received immediately.
- Refund fraud — The subscriber offers a refund, credits money in excess of the refund amount and requests additional money for gift cards.
- Fraud with grandparents – Someone pretends to call on behalf of a relative or friend who is in trouble and asks for money for help.
- Freebie and sweepstakes scams — A gift card is required to pay a processing fee to receive a prize of free merchandise.
Tips for preventing fraud
Some tips for consumers who want to avoid becoming a victim of gift card fraud, according to the division, include:
- Never use a gift card to pay or transfer money. Government agencies and legitimate businesses will never ask you to pay with a gift card.
- Avoid sharing gift card information—including by phone, text, email, or photo—to pay bills or fees, or to resolve any other issue.
- Make sure urgent requests or emergencies involving family, friends or colleagues are genuine by calling the person directly to confirm they need your help.
- Hang up on any caller who tells you to lie to the store clerk about why you are purchasing gift cards.
- Before purchasing, check the packaging and the back of the gift card to make sure it hasn’t been compromised.
- Save your receipt or gift card ID number to file a report if you lose your gift card or suspect fraud.
Victims can report gift card fraud to the FTC by visiting a special site. Reports may also be made to the Division of Consumer Affairs at 1-800-242-5846 or online.
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