By Bradley O. Cebeci and Jennifer Cho

Based on data collected by the Federal Trade Commission (FTC), gift cards have topped the list of reported fraud payment methods every year since 2018. Indeed, gift cards continue to be the most common form of payment when consumers report losing money to scammers. This makes sense – scammers like receiving payment by gift cards because they are easy to liquidate and hard to track.

How does this work? Scammers, often posing as business associates, government representatives, or technical support servicers, give some reason why the consumer needs to buy gift cards. For instance, a scammer posing as a work supervisor might say that he or she needs gift cards to give to clients or a scammer posing as a business might promise special promotional pricing on a service if the consumer prepays for the first few months using a gift card. The scammer will then tell people to go to specific stores like Walmart, Target, CVS, or Walgreens to buy the physical gift cards. Once the consumer has purchased the gift card, the scammer will ask for the gift card number and PIN on the back of the card. And boom, the scammer turns the card to cash. Before the consumer knows it, he or she has been scammed out of potentially hundreds of dollars. In fact, since 2018, people have reported losing nearly $245 million in gift card payment scams, with a median individual loss of $840.

Due to the pervasive nature of these scams, the FTC has rolled out a new consumer education campaign designed to prevent consumers from falling victim to gift card payment scams. As part of the campaign, FTC has created infographics intended to be displayed at cash registers or at gift card carousels inside retailers to stop consumers who may be in the process of buying gift cards to pay a scammer. The infographic asks: “Buying a gift card to pay someone?” and then follows with “Stop. It’s a scam!” The materials go on to remind consumers that “gift cards are for gifts, not payments.” FTC also created shareable images and video for social media and suggested hashtags, all containing similar messaging.

The bottom line is that gift card scams are very much on the FTC’s radar. So scammers beware!

Bradley O. Cebeci is a Partner, and Jennifer Cho is an Associate Attorney, with Rome & Associates, APC. Brad and Jennifer focus on Payments and Digital Marketing Law.