9/16/06

GIFT CARD SCAM - a 2 yr old scam that hasn't gone away!



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I read about a scam on gift cards. Seems that people are collecting and taking away quantities of these blank gift cards, making note of the numbers on the cards and returning them to the shelf.

Every few days they phone the automated toll free number and inquire about the balances. When they find one that has been purchased and has a balance they use them with online orders.

I would assume that they have the merchandise sent to some bogus name at a mail receiving service or POB and not to their home address.

Sounds like a lot of work as I would think most people buying gift cards are doing it in moderate amounts ($25-50), but you can use multiple gift cards on a single purchase.

So if you hear of a complaint that there was nothing on some poor schnooks gift card and they can prove they did purchase one, this might be the reason.

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Wal-Mart Hit By Gift Card Scam

June 10, 2004

By Connie Thompson


SEATTLE - Thieves have found a way to secretly cash out your gift card before you have a chance to go shopping.

The biggest target so far is the nation's largest retailer: Wal-Mart.

We uncovered the problem after tips from local consumers.

Wal-Mart won't say much. A spokesman in Arkansas characterizes it as a "small issue in some pockets of the country."

But police are investigating, and if you use gift cards, you need to know about this.

"You think it's safe to give someone a gift card!" said Tami Kegley, who contacted us after she and her church group chipped in for a $150 gift card at a Wal-Mart in Bonney Lake. Tami had put the purchase on her credit card.

The shopping card, as Wal-Mart calls it, was a gift for a colleague.

"She loaded up her cart and took it up there and they said there was nothing on the card," she said.

The same thing happened to Carol Kent and her husband with a $25 card at the Wal-Mart in Puyallup.

Carol: "She said 'I'm sorry, but there's a zero balance on this.' And we're like, 'What?!' She ran it again and she said, 'No, I'm sorry. It's already been cashed out.' "

Carol's shopping card was purchased in Olympia, and days later, cashed out by a stranger at the Wal-Mart in Chehalis even though Carol still had the card.

"Here's my receipt," Carol points to the shopping card notation at the bottom which reads: "Shop card reception 0.00"

In Tami's case, her receipt shows the $150.00 card was activated at 11:32 in the morning, then cashed out three hours later in a another state!

"At a store in California," Tami explained. "He (the Wal-Mart employee) wasn't sure how it was being done, but he told me it had happened several times through that same store in California."

Wal-Mart acknowledges the scam, but for security reasons will not discuss details.

A corporate spokesman says the company, " is working with law enforcement at the highest levels possible, to rectify the problem and catch the people responsible."

As for making good on the stolen money?

"Well initially he told me that he really couldn't do anything for me," Tami Kegley says of the Wal-Mart employee she dealt with. "He said it was a corporate issue."

But Tami persisted, and got finally got the $150.00. Carol also got her money back.

"And they said they're working on it, and that there's been a couple memos on it throughout Wal-Mart," Carol said.

Wal-Mart won't go into how this is happening, but assures us it has extra security measures in place.

One other national retailer reports an isolated incident of the same scam in Michigan and the employee involved was caught.

Wal-Mart says if you learn your card has been hit, you should have no problem getting your money as long as you have the receipt to verify the transaction. The receipts record the exact date, time and code number of the card transaction, as well as codes showing where the cards were both purchased and redeemed.

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January 19, 2006


Retailers on guard against gift card fraud

(Dallas Morning News, The (KRT) Via Thomson Dialog NewsEdge) DALLAS _ Now that holiday gift card givers have handed out billions in plastic presents, the scam artists are as busy as Christmas elves.

Gift card fraud _ be it a simple sleight of hand or elaborate techno thievery _ is on the rise, experts say. As the use of gift cards grows, so does their attractiveness to crooks. Consumers bought an estimated $18.5 billion in gift cards this holiday season, up 6.6 percent from 2004

Retailers and restaurateurs are working with trade groups, processors and law enforcement to spot and stop the latest scams without making the system too burdensome for legitimate consumers.

"Gift card fraud is a growing concern among retailers nationwide," said Joseph LaRocca, vice president of loss prevention for the National Retail Federation, an industry trade group.

"Gift cards are being used as mainstream currency among retailers, from fast-food restaurants to major department stores."

In fact, restaurateurs, although later to the gift card game than their retailing cousins, represent a rapidly growing group of gift card sellers.

Major retailers continue to dominate, with a 70 percent share of gift cards purchased.

But restaurants accounted for 12 percent of gift cards purchased in 2005, more than double the 5 percent reported two years before, according to First Data Corp., which processes electronic transactions.

Since so many gift cards are given during the holidays, January and February become prime months for gift card redemption, by consumers and thieves.

Experts describe gift card fraud as a small part of the overall $31 billion in retail "shrink." The catch-all term includes everything from employee theft to vendor fraud at retail stores, not including restaurants.

"When you look at that number, the gift card fraud losses that I'm aware of are minuscule," LaRocca said.

He and others said they've not seen solid numbers that can quantify the problem.

"There isn't a lot of good data," said Richard Hollinger, a criminology professor at the University of Florida who produces the annual National Retail Security Survey. "Companies have private data on the extent to which they're having a problem."

But many of those companies, wary of tipping off thieves and scaring off customers, are secretive about their fraud losses and prevention tactics. Several restaurant companies declined to comment for this article due to security concerns.

Experts said they see the problem as significant and growing _ and the thieves as increasingly sophisticated.

"Each of the various retail companies has investigative teams that are working on this," Hollinger said, adding that the FBI gets involved in cracking some scams.

Gift card fraud can take various forms _ and each presents challenges for the companies that get into the gift card game.

The easiest to pull off is the simple sleight of hand. The store clerk or restaurant server hands you a card that you think has value when it doesn't, then pockets the real card.

That fraud is harder for diners at sit-down restaurants to immediately detect because the card leaves their sight.

Increasingly, Hollinger said, gift card fraud is tied to organized shoplifting. Thieves steal merchandise and bring it back for a refund, sans receipt.

Many retailers now put refunds on gift cards, which can then be marketed via online auction sites.

LaRocca calls that "e-fencing."

That fraud affects retailers more than restaurants since consumers rarely return cheeseburgers.

But all industry segments are on the alert _ and on the offensive.

To fight back, retailers, restaurateurs and the transaction processing industry are stepping up monitoring of gift card sales and redemptions, in some cases requiring a manager's approval for a sale.

Others create extensive databases that key in on unusual transactions or patterns involving the same person or group.

"We track things, looking for strange activity," such as the frequency with which money is put onto a card and then taken off, said Andrew Robbins, president of Paytronix Systems Inc. in Cambridge, Mass., which helps restaurants run their gift card programs.

"We try to find the people who are doing that the most," he said.

People are going to find a way to cheat, said Tamara Jones, vice president of business services for Plano, Texas-based Metromedia Restaurant Group, speaking at a recent restaurant technology conference.

"But the reporting is such that you can narrow it down to the server," she said.

Concerns about thievery have not been enough to keep growing numbers of restaurateurs and retailers out of the game.

"Most often, they have a big concern up front about fraud, then when they start looking at the upside, it more than outweighs any issue about fraud," said Adam de Malignon, sales director for Gift Card Solutions, a Salt Lake City provider of paper and electronic gift products and services.

Merchants like gift cards because they can increase sales (consumers often spend more than the card's value), bring in first-time customers, build brand awareness and, if the customer registers the card online, serve as a marketing tool.

"I've seen ... (wariness) delay people, but they see there's too much money to be made," he said.

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Some Q & A:

GIFT CARD SCAMS?
I've been hearing from people about how gift cards from businesses can easily be scammed, but I just don't see how that can be done. I mean, they're not activated until you buy them, and then they're just stored-value cards, right? Can you explain?

Well, I don't know that I want to get the reputation of being an expert criminal mastermind, but I did recently read about one ingenious method by which companies like Wal-Mart, Target and The Gap are encountering problems with their gift cards.

The key is that gift cards each have a unique serial number in the magnetic strip and then the gift card management system uses a centralized computer to track outstanding balances and usage.

Without any scams involved, it works great and if you know the unique ID number of your card, you can even call up and report it stolen, without losing any of the remaining balance.

The problem arises when you realize that small handheld mag-strip scanners are inexpensive and easily acquired. Now imagine this: a criminal has one of these devices in his (or her) pocket and walks into a store that offers these plastic gift cards.

They grab a big handful of cards as if they're a big spender, wander into a quiet corner (or a dressing room), then quickly scan each and every card to record their unique ID numbers. Then they're done with the cards so they put them back on the display or leave them on a shelf for an unsuspecting employee to put away.
Now that afternoon you innocently traipse into the store and pick up one of these tainted cards, "charging it" with $500 for your sweetie.

That's where the problem arises. The criminal can easily buy a gift card and charge it with $5, then reprogram the mag strip to match your card ID number (which they'd previous scanned and stored) and merrily shop until your balance goes to zero.
Now, how would they know when your card is activated and how much is left on it? Because all of these stores that offer plastic gift cards also offer a system where you can check your card balance via telephone with just the ID number. Every 4-5 days the criminal checks the balance on their stack of card IDs, and once one goes golden, they either start shopping or, worse, perhaps offer it for sale on a site like eBay.

Either way, I'm not sure that I'd be purchasing plastic gift cards for any of my friends with this sort of exploit so relatively simple. There are better and safer ways of sharing your affections.

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