Target Sued In Two Class Actions Over Gift Card Scams

Forbes

13 hours ago

Scammers are big fans of gift cards because they are easy to purchase, easy to send to the scammer and impossible to trace. It is not even necessary for the scammer to be in possession of the actual gift card to use it. Sending the gift card numbers or taking a picture on your phone and transmitting it to the scammer is sufficient for the scammer to use the gift card to buy things that can then be sold and converted into cash.
In many instances scammers pose as large companies or government agencies such as the IRS demanding payments. This is called an "imposter scam.' According to the FTC, in 2024 Americans lost $2.95 to imposter scams, second only to investment fraud.
In 2021 the FTC noted that Target gift cards were the most popular choice for scammers with scammers asking specifically for Target gift cards in twice as many instances as the next most popular gift card and even when the gift card requested by the scammers was not a Target gift card, the scammers asked their victims to purchase the particular gift cards at a Target store. More recent data of the FTC indicates that Target gift cards were the second most popular gift card of scammers with Apple gift cards being most used by scammers.
Recently four victims of the imposter scam sued Target seeking class action status alleging that Target failed to use its own security algorithms and real-time tracking software to prevent these scams. The plaintiffs further allege that Target benefited financially from gift card scams.
Responding to the lawsuit a Target spokesperson said 'While we cannot comment on pending litigation, we take significant steps to combat this type of criminal activity and protect consumers.'
One of the plaintiffs, Robert Reese received an email from a scammer posing as an Amazon customer service representative who convinced him he needed to send Amazon $10,800 in gift cards, instructing him to get $6,000 of that amount from Target through the purchase of twelve $500 gift cards.
HOW TO AVOID GIFT CARD SCAMS
Fortunately, scams requiring payment through gift cards are easy to avoid. Anytime anyone approaches you with a business transaction in which you are asked to pay through gift cards, you can be confident that it is a scam. The IRS even posts on its website that it does not accept gift cards as payments. An important thing to remember is that gift cards are gifts, they are not used as a payment method for any legitimate transaction so if you are asked to pay for any business transaction through a gift card, you can be sure it is a scam.
Target has also been sued in a class action regarding gift card scams by customers from 21 states who bought Apple gift cards at Target that had been tampered with by scammers that resulted in the scammers emptying the gift cards of their value. The plaintiffs allege that Target is aware of this problem and has not done enough to stop it.
This type of scam is called gift card draining. The most common way gift card draining occurs involves scammers going to racks of gift cards in stores and, using handheld scanners, read the code on the strip of the card and the number on the front. They then put the card back in the display and periodically check with the retailer by calling its 800 number to find out whether the card has been activated and what the balance is on the card. Once they have this information, they either create a counterfeit card using the information they have stolen or order merchandise online without having the actual card in hand.
Another common way gift card draining occurs is when scammers place a sticker with the barcode of a gift card that the scammers possess over the actual barcode of the gift card in the rack. Thus, when the card is taken by the gift card purchaser to the checkout counter to have the card activated, the funds used to purchase the gift card are credited to the card of the scammer. It is not until the gift card purchaser tries to use his or her card that it is discovered that there are no funds credited to the card.
Some retailers, to reduce gift card fraud put a PIN on the gift card so that if the card is used online, the user must have access to the PIN which is generally covered and must have the covering material scratched off in order to be visible. Unfortunately, many purchasers of gift cards are not aware of this, so they don't even notice that the PIN on the card that they are purchasing has already had covering material scratched off by the scammer who has recorded the PIN.
HOW TO AVOID GIFT CARD DRAINING
As with so many scams, the best place to look for a helping hand is at the end of your own arm. Always inspect the card carefully to make sure that the barcode has not been tampered with in any fashion and that the PIN is still covered and when buying a gift card, only purchase cards from behind the customer service desk. If the card is preloaded, always ask for the card to be scanned to show that it is still fully valued.