Retailers' Efforts to Stop Gift Card Scams Often Fall Short
SAN FRANCISCO (KPIX) -- Gift cards are a major industry projected to bring in $160 billion this year alone. But gift cards are more than just money-makers -- they're also a common tool for scammers. Now some are questioning whether the stores that profit from gift card-related scams should be doing more to stop them.
Imposter scams come in many forms, from the IRS Scam, to the Grandma Scam and the Tech Support Scam, but these days they usually begin with a phone call or a text and end with a gift card used as payment.
Scam Victims Vary
In Annette Jenkins' case, the call came from a crook who convinced her that her grandson was in jail and desperately needed her help. Instead of a check or wire transfer, they told her to purchase two $1,000 Walmart gift cards and read them the PIN numbers over the phone.
"I questioned the way I needed to pay, I said 'Walmart gift cards?' And he said, 'Well, we have an arrangement with the court,'" Jenkins explained. "In the state I was in, it sounded feasible."
Like Jenkins, Shirley Hill was also the target of a scam -- a loan scam that cost her $1,500. The phone call was different but it ended the same way.
"He said, scratch off the numbers on the back and give me the numbers," Hill recalled.
Lula Scott is yet another victim who contacted us after discovering she'd been scammed.
Crooks convinced her to buy 19 gift cards, valued at $100 each.
"I was supposed to get iTunes gift cards," Scott said.
While the type of imposter scams varied in these cases, all three victims had two things in common: They purchased their Gift Cards from Walmart and no one at Walmart attempted to warn them or help.
Store Training Policies
Many stores have started training employees on how to identify common signs of an imposter scam. A would-be victim recently told us that a Safeway grocery store clerk stopped her from buying gift cards for a scam.
The clerk, Pam Watts said she was tipped off by common signs. "She was on the phone at the time with the people who were trying to scam her so I told her to tell me what's going on," Watts said.
Safeway told us it "instructs employees to be mindful of certain observable customer behaviors, when purchasing gift cards."
They point to customers making large gift card or pre-paid card purchases while talking on the phone or "taking a large amount of cash from a white envelope." Best Buy said it also trains employees to be aware of the scams and recently began posting scam warnings at registers.
While Walmart told us "Our stores have policies in place to help guard against these types of crimes and we train our associates to be aware of this potential threat." But, when we went undercover at both Walmart and Best Buy, we found employees repeatedly ignored clear signs of a potential scam.
Gift Card Scam Undercover
Our volunteer, Gerald, posed as a confused, elderly, would-be victim. He first asked clerks for $1,000 worth of in-store gift cards.
Then, after glancing at his phone as if reading a text, he asked for an additional $1,000.
Finally, after pulling out a white envelope filled with $1,000 in cash, he gave clerks one more chance to stop him by pretending to need more money and asking for an ATM.
In four out of the five cases, the clerks ignored the common signs of a scam and actually pointed Gerald to the ATM.
A Best Buy security guard at the last store we visited was the only person to intervene when he heard Gerald ask for the ATM.
At Walmart, it wasn't until Gerald asked for three $1,000 gift cards -- while pretending to talk with a scammer on the phone -- that he finally triggered a response from store management: a warning that, if he got scammed, they couldn't help him.
Gift Cards The New Western Union
According to Wallet Hub, gift card sales are up $30 billion from 2015. A lot has changed during that time, including the way scammers are increasingly demanding payment.
Wire transfers used to be the go-to payment method for scammers but, following federal money laundering charges, Western Union is now prohibited from allowing a transaction that it "reasonably should know is fraud induced." If it does, it has to reimburse the victim.
Now gift cards are the new go-to for scammers because -- like wire transfers -- gift cards are "almost untraceable," unless the retailers or card issuers step in.
Retailers Can Help Stop Scams
Kerry O'Brien, the Federal Trade Commission's San Francisco assistant regional director, said that, while there are no laws mandating how stores handle this type of fraud, some retailers have voluntarily implemented policies that could stop scammers in their tracks.
"If a consumer has been scammed and has given out that code, the thing they should try and do as quickly as they can is have that card disabled," O'Brien said.
Not only can a company freeze remaining funds on a gift card if fraud is reported in time but online retailers also have a second line of defense.
"If the company can tell where the product is shipped, maybe they can stop the shipment as well," O'Brien added.
Store gift card scam policies Vary but policies vary from retailer to retailer.
Best Buy said it will freeze remaining funds if the fraud is reported in time, though they do say the scammers often use the card instantly in another store.
However, in Lula's case, she realized she had been scammed before she gave the gift card numbers to the crooks. Still Walmart refused to refund her for the nineteen $100 gift cards.
"I got upset because I couldn't turn the cards in," Lula said.
Annette said Walmart told her the gift cards she purchased had been used online, and even though the items were still in the warehouse, they refused to stop the shipment and refund her.
We submitted a Freedom of Information Request to the Federal Trade Commission and learned that "Walmart" is the "top subject" of gift card-related imposter scam complaints submitted to the agency.
After we told Walmart about our undercover findings, a spokesperson told us they've now changed their policy stating, "We have empowered our call center associates and asset protection to immediately freeze cards upon complaints of fraud. Call center associates can also attempt to suspend shipment of an item purchased with fraudulent funds."
After we got involved, Walmart did help Lula get her money back for the 19 unused gift cards.
More than 8 months after we first brought Jenkins to their attention, Walmart says it is now re-examining her case.
Jenkins hopes the retailer will agree to reimburse her since she believes they could have prevented the fraud to begin with by stopping shipment of the online purchase when she told them she'd been scammed.
"Well, I imagine if the crooks can't get the money then there's no sense even making these calls," she said.
Walmart Original Statement, August 2017:
"We hate to hear about anyone being taken advantage of by thieves or scammers. Our stores have policies in place to help guard against these types of crimes, and we train our associates to be aware of this potential threat. If any of our customers have questions or concerns, we encourage them to ask a member of management before following through with a purchase." Walmart Revised Statement, April 2018:
"Fraud is a difficult crime to identify and protect customers against. As the fraudsters are becoming smarter and learning our protections, we are constantly evolving to better protect our customers. For example: · We have signs at the main gift card display warning customers about fraud.
We have added a disclosure on the back of Walmart gift cards, instructing the customers to treat same as cash.
We have empowered our call center associates and asset protection to immediately freeze cards upon complaints of fraud. Call center associates can also attempt to suspend shipment of an item purchased with fraudulent funds. " Best Buy Full Statement:
"The last thing we want is for someone to be taken advantage of. In addition to signs in our stores, our employees undergo training to help spot customers falling victim to potential scams. If a customer believes that he or she is a victim of a scam, they should report it to both law enforcement and Best Buy right away. If the gift card has not been used and the customer notifies us, we can freeze the card and potentially refund the customer. However, a gift card is like cash and once it has been used, we can't freeze it. That is why almost all scammers who steal gift cards redeem them within hours in a store, making it nearly impossible to trace."
