COLUMBIA, Mo. (KMIZ)
Gift cards often make great stocking stuffers this time of year, but they can also be an easy way for scammers to bleed people dry of hundreds and thousands of dollars.
A detective at the Boone County Sheriff's Office said the department often encounters financial extortion scams involving gift cards. She said the scam begins when people get an email, phone alert or a pop-up on their computer.
"They're going to say that there's a virus or you're going to have law enforcement come to your door or you're going to have a warrant out for your arrest," Det. Tracy Perkins said.
Once a scammer has gotten the victim's attention, they will direct the victim to purchase a specific amount of money on a gift card at a specific store to get rid of the problem.
"Nobody wants to be in trouble with anyone, so when they use that power and control, it becomes a confusion, and then they're going to start making those requests," Perkins said.
Cristina Miranda with the FTC's Division of Consumer and Business Education said the scammer will often stay on the phone with the victim while directing them to which store to go and which gift card to buy.
Once the gift cards are purchased, the scammer will then ask the victim for the gift card number and PIN on the back of the card.
"Once you do that, the scammer will get the money that you loaded on the card," Miranda said.
The FTC said scammers prefer gift cards because they're easy for people to buy and have fewer protections than some other payment options while allowing the scammer to remain anonymous.
The FTC has had 31,169 reports of gift card fraud nationwide this year through October. The reports have totaled $160.9 million in losses.
In 2022, 48,889 reports were made to the FTC, totaling $228.1 million in losses.
Miranda said the numbers have increased each year for several years.
"Since 2018, the gift cards have been the most frequently reported payment method for fraud," Miranda said.
An FTC report published in 2021 showed an increase in gift card scams and losses from 2018-2021. In the beginning of 2018, there were about 5,000 reports totaling $11 million in losses. In the beginning of 2021, there were over 14,000 reports totaling $51 million.
Why it works
Perkins said so many people fall for this scam because it happens so quickly with lots of moving parts.
"They're using that power and control," Perkins said. "They're getting them to believe in what the storyline is and they're wanting them to move fast. When they start moving fast, they can't stop. They're working on our emotions."
Perkins said when people believe they're going to get in trouble with law enforcement or with the IRS, they stop thinking rationally and begin thinking emotionally. The victim's rational thinking doesn't get triggered until someone puts the idea in their head they might be getting scammed.
Perkins wishes employees of retail stores would be more proactive and confront the customer or radio a manager if they see someone buying hundreds of thousands of dollars in gift cards.
"I'm speaking for just Boone County. This is a nationwide issue," Perkins said. "I'd like to see a more proactive approach that (companies) are taking because the scammers know it's easy to get somebody on the hook. Now, it's up to the individual stores and individual people to say 'Enough is enough, and we've got to stop the cycle.'"
What stores are doing
ABC 17 News asked large retail stores the following:
- Are employees trained to look for customers buying large numbers of gift cards?
- What training or education is provided?
- What is the protocol if an employee notices someone buying hundreds of dollars in gift cards?
- Are customers able to be reimbursed after buying a large number of gift cards for a scam?
- "We are aware of the prevalence of gift card scams and take them very seriously. We have signs in our stores and share general safety tips with our team members so they can stay alert and help guests as best they can at our registers. Our centralized cyber fraud team helps educate our team members about common scams and encourages them to look for guests purchasing high dollar amounts or large quantities of gift cards, or tampering with gift cards in stores."
- Stores have signs on gift card displays to warn customers of potential fraud.
- Employees receive training on warning signs for customers who may be victims of a scam.
- The company has reduced gift card purchase limits to $500 per card at a total daily limit of $2,000 per person.
- Stores have warnings on credit card readers that are prompted when a customer purchases a gift card above a certain amount. The warning includes information about gift card scams and makes a customer agree they are aware before purchasing the gift card.
- Employees are provided with annual Anti-Money Laundering Gift Card Training which covers Schnucks' gift card policy and common gift card trends and scams.
- All store checkers and management are required to take annual computer training.
- Stores have a gift card purchase limit of $1,000 per customer per day.
- If an employee thinks a customer might be a scam victim during a purchase, they are supposed to notify management for a conversation with the customer. If it's noticed after the purchase, the information is given to the corporate office compliance center.
- Website warns customers of common scam methods and provides details on how to report fraud to the FTC.
- Says they regularly partner with law enforcement on these cases
- Offers tips for customers such as don't share a gift card pin with strangers and notify the customer service department if you've been scammed
ABC 17 News also contacted Walmart, Lowe's, Walgreens and CVS. Walmart and Lowe's have not responded, and Walgreens and CVS declined to comment.
What to do if someone's been scammed
The FTC has a list of common stores where scammers request gift cards from customers and phone numbers for them to contact. It encourages scam victims to keep the gift card or a copy of the receipt and contact the retailer.
"The most important thing is to really act right away and contact [the store] right away, and be upfront about telling them about the fraud or scam that you experienced with that type of gift card and ask for your money back right away," Miranda said. "There are some companies that will help stop it."
After someone contacts the retailer, Miranda said people should report the fraud to the FTC.
People should also report it to local law enforcement. Perkins said it's sometimes days after a scam has taken place before the Sheriff's Office gets notified, and she said that's too late because as soon as the scammer uses the money on the gift card, that money is gone.
"That's why they want you to have those cards, is because they know that once they cash them out, there's no retrieving that back," Perkins said. "Usually with those, we have found transactions to show that they're already cashed overseas in another country somewhere."
Tracking down the scammer
Perkins said the Sheriff's Office will want to know how the scammer communicated with the victim and how the money was transferred to then try to get records and court orders for certain accounts to see what more data they can find.
She said these scammers are typically overseas, so there's potential there won't be an arrest or any type of restitution. Most scammers also cover their tracks by masking their IP address or using a burner phone to talk to the victim, Perkins said.
"I think it happens a lot more than we know of because individuals know that they've been scammed and they might only be out $50 or they could be out $500 and they know they're not going to get the money back and they don't bother with reporting it to law enforcement," Perkins said.
Boone County Prosecuting Attorney Roger Johnson said online frauds, such as gift card scams, are hard to get to court because it's difficult to identify the scammer. He said to his knowledge, no gift card scammer has been able to be held accountable at the state level.
"The first step for us is to review information from a police agency, and oftentimes, the police agencies are not able to identify the person," Johnson said. "So, it doesn't get as far as us."
How to avoid falling victim to a gift card scam
Perkins said these financial scams often target the elderly, and that it's important to stay proactive and be able to recognize the scam before it's too late.
Her tips include:
- Don't answer phone calls from unknown numbers
- Don't answer emails from unknown people
- Don't click on unknown links online
- If a computer says a virus has been downloaded, turn off the computer and restart it
"Shut the computer off, shut the phone off, and that stuff will go away. It'll then boot back up and it'll be gone," Perkins said. "But if we react to what we see in front of us, you're going to be a potential victim of a crime."
The FTC said no legitimate company or official will ever ask for payment in gift cards, so that should be an immediate red flag.