Jun 7, 2024 - Technology

Retailers can't keep scammers away from their favorite payment form: gift cards

Illustration of a hand cursor holding four credit cards.

Illustration: Shoshana Gordon/Axios

Retailers are struggling to rein in the proliferation of scammers tricking Americans into buying thousands of dollars' worth of gift cards.

Why it matters: The Federal Trade Commission estimates that Americans lost at least $217 million to gift card scams last year.

  • That number is likely higher, given many victims are too embarrassed to report to law enforcement.

Driving the news: Cracking down on gift card scams was a hot topic this week at the National Retail Federation's (NRF) cybersecurity conference in Long Beach, California.

How it works: Some gift card scams start with texts from people pretending to be tech support, your boss, the government or a wrong number. Eventually, those conversations lead to someone asking the victim to buy gift cards on their behalf and send the barcode number to them via text.

  • Others involve criminals in physical locations, tampering with a gift card to access the barcode information and then stealing the funds without taking the actual card.
  • Each scam targets vulnerable populations: elderly, less-tech savvy people; those who are lonely and work from home; and even young kids, experts say.

The big picture: Gift cards, like cryptocurrencies, often give scammers easy access to difficult-to-trace money.

  • Because most gift cards are offered through third-party brands, it's difficult for retailers to tell how and where the money was spent without working with those partners.

By the numbers: AARP receives roughly 100,000 gift card scam phone calls to its helpline each year, said Amy Nofziger, its director of fraud victim support.

  • In a testimonial Nofziger played during her presentation at the NRF conference, an elderly victim said she sent a scammer $31,000 as part of a romance scam that involved gift cards.
  • "I know that there is more that we can do and I know that we, collectively, are failing [victims]," Nofziger said. "We're failing their families."

Between the lines: Apple, Google Play Store and payment gift cards, like a Visa or American Express card, are the biggest targets for scammers.

  • Scammers use Apple gift cards to purchase Apple products and resell them.
  • Some scammers can use Google Play Store gift cards to purchase cryptocurrencies or sell them at a discounted rate online.
  • AARP saw a spike in scammers asking for Sephora gift cards so they could resell expensive beauty products online, Nofziger said.

What they're saying: "I'm going to be honest with you, I don't have the magic answer to [solving gift card tampering]," Cassandra Butler, deputy assistant director of intelligence in the FBI's criminal investigative division, said during the NRF conference.

Zoom in: Walmart has undertaken several initiatives to crack down on gift card scams, Claire Rushton, senior director in Walmart's global investigations team, said.

  • The retail giant has created an internal database that tracks where a Walmart gift card was purchased, where it was spent and how quickly it was used. If a card moves too quickly across the United States, "that gift card is frozen," Rushton said.
  • Walmart gift cards also no longer work outside of the United States, which keeps overseas criminals from using the barcode numbers.
  • Walmart has also partnered with the FBI, Secret Service and other local law enforcement to crack down on in-person gift card tampering rings.

Yes, but: Retailers and gift card scammers can still do more to crack down on these scams, experts say.

  • Victims have noted that they never see warning signs on gift card racks about the potential of scams, Nofziger said.
  • Retailers and gift card vendors could be doing more to work together to trade information about the scams they're seeing, Rushton said.
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