Visa defeated a proposed class action lawsuit that alleged that the company did not warn consumers that its prepaid Vanilla gift cards could be drained by thieves.
The judge hearing the case ruled Monday (June 23) that it was unreasonable for consumers to believe that gift cards were impervious to scams or that Visa’s logo on the cards ensured no scams would occur, Reuters reported Monday.
In addition, the judge said that news coverage and online comments about “card draining” scams disproved plaintiffs’ claims that Visa did not provide adequate warnings on the packaging of the Vanilla cards, according to the report.
“No reasonable consumer would expect the allegedly ‘widespread’ practice of third-party scams affecting prepaid cards to somehow not affect one of the industry’s major suppliers,” U.S. District Judge Gregory Woods wrote, per the report.
Card draining is a scam in which criminals deplete the value of gift cards before they are used, PYMNTS reported in July. This scam is the latest iteration among a proliferation of gift card scams.
U.S. Immigration and Customs Enforcement (ICE) said in August that gift card draining and other gift card fraud is a growing crime.
The most common types of gift card fraud include card tampering, in which criminals manipulate gift card packaging to steal card information before the card is sold and then drain the funds after a consumer purchases and loads money onto the card; online attacks, in which criminals gain access to online gift card accounts through phishing or hacking; and victim-assisted fraud, in which criminals trick individuals via phone or online into purchasing gift cards and sharing the redemption codes, ICE said at the time.
“Gift card draining techniques not only affect retailers, but also our Nation’s economy and jeopardize our Nation’s national security and public safety,” ICE said.
Gift cards have become an attractive target for fraudsters due to their easily monetizable nature, PYMNTS reported in November 2023. Gift cards provide fraudsters with a level of anonymity, as they can be sent electronically or used directly in-store, and there are generally no chargeback options, which makes it virtually impossible to recover funds.
