A.G. Schneiderman Issues Consumer Alert Warning Of Financial Scams Involving Gift Cards

Following An Uptick In Complaints Of Scams Targeting Senior Citizens That Utilize Gift Cards, A.G. Schneiderman Issues Tips To Protect New Yorkers

Attorney General’s Office Will Work With Retail Council, AARP, And Others To Make Changes To Help Safeguard Customers

   Attorney General Eric T. Schneiderman today issued a consumer alert about scammers utilizing gift cards to commit fraud against consumers, and in particular senior citizens, following an uptick of complaints received by the office. The Attorney General also announced that his office would partner with the Retail Council of New York State and AARP to adopt measures to protect customers from and educate them about common scams that utilize gift cards.  In addition, the office is meeting with retailers, credit card companies and banks to institute additional measures to protect consumers from these scams.

“Each year, countless New Yorkers lose thousands of dollars through a variety of constantly-evolving financial scams—the latest of which exploits gift cards and targets senior citizens. While it is important for consumers to be on alert and recognize a potential scam, retail stores, credit card companies, and banks can also play a role to thwart scam artists. By working together to enact common sense reforms, we can crack down on these fraudsters and hold them to account,” said Attorney General Schneiderman. 

The Grandparent, IRS, and similar phone and internet-based scams are pernicious and the resulting harm to consumers can be devastating. In many cases, consumers end up losing a significant portion of their savings.

With these and other similar scams, the scammers provide instructions that enable them to obtain funds from the victim.  Although traditionally scammers ask consumers to wire money through Western Union or MoneyGram, more recently, scam artists have employed other methods to steal consumers’ funds, including using a variety of gift cards or pre-paid debit cards.  In the IRS Scam, the caller claims to be an agent or police officer from the Internal Revenue Service calling about a past due tax balance that is owed. The caller typically tells the victim that unless the debt is paid immediately, a team of officers will come to the victim’s home that day to arrest him or her, or that a warrant has already been issued for his or her arrest.  In the Grandparent Scam, a grandparent receives a call from someone posing as a grandchild claiming that he or she is out of town or the country facing an urgent need for money -- to make bail, pay a fine, or pay for automobile repairs or medical expenses. The caller begs the grandparent not to tell his or her parents. 

The story of one consumer, who recently became a victim of the Grandparent Scam, illustrates both the devastating impact these scams can have on consumers and the inadequate safeguards at retail stores, banks, and credit card companies to prevent their customers from being victimized.

An 82-year old grandmother received a call from someone posing as her distraught granddaughter, claiming that she had been the passenger in a car driven by her friend, who was pulled over in Boston by the police, and that $100,000 worth of cocaine was found in the car.  The “granddaughter” claimed that she had been arrested and needed money for bail.  Someone posing as a police sergeant then got on the phone and instructed the consumer to purchase several thousand dollars’ worth of gift cards and to call him back with the numbers on the back of the cards.  After the consumer complied with the request, the scam artists repeatedly called the consumer over the course of the next eight days with additional pretexts, demanding more money. 

The consumer subsequently purchased gift cards on approximately ten occasions and ultimately lost a total of $36,000 from the scam. On at least five occasions, the consumer, who otherwise incurred minimal monthly charges on her credit card accounts, charged thousands of dollars-worth of gift cards at three different retail chains, with single-transaction amounts of $6,000 on one occasion, $5,000 on another, and $4,000 on two other occasions.  Although a number of the credit card transactions triggered fraud alerts, causing a credit card company representative to contact the consumer on the date of the transaction to verify the charges, on each occasion, after the consumer indicated she had authorized the charges, the representative asked no further questions.

After maxing out her credit cards, the consumer went to her local bank branch and withdrew $16,000 in cash, nearly emptying her bank account, and subsequently used the funds to purchase additional gift cards, in amounts totaling $5,000 at one retail chain store in the morning and $4,000 at a nearby location of the same retailer in the afternoon. 

Consumers who have been victimized by these scams have purchased gift cards at a variety of chain retail stores, including Walmart, Target, and Best Buy.

The Attorney General will outline his tips to AARP members on a statewide tele-town hall today, as part of continuing joint efforts between the Attorney General’s Office and AARP to educate consumers about fraud and take concrete steps to fight it, including a series of free and open to the public AARP-sponsored document shredding events from Long Island to Buffalo over the next two weeks, in which the Attorney General’s Office will participate.

Scam artists are always continuing to devise new schemes to defraud consumers, so it is important for consumers to learn how to protect themselves by taking some basic precautions.

Tips To Avoid Falling Victim

If the caller is a stranger, you should sense potential danger:

• Never give out personal information to a stranger on the phone, even if they claim to be a representative from your bank, credit card company, or any other company with which you’ve done business.
• Never wire money through Western Union, MoneyGram, or any other wire service to a stranger.
• Never purchase gift cards for the purpose of providing the gift card numbers to a stranger or someone who claims to be a loved one—gift cards are not a legitimate form of payment.

If you have an elderly parent or loved one:

• Consider passing along these tips to them and don’t assume that they can’t be victimized.
• Consider seeking their permission to be involved in their finances, including asking credit card companies to alert you when they make an unusually large purchase.
• Assure them that they should check with you before making a payment or purchase, especially if a caller has instructed them not to.
• Encourage them to immediately contact you and/or the police if they get a call like those described here.

Attorney General Schneiderman reminds New Yorkers that in addition to being vigilant consumers, they should also report instances of fraud to his office.

Consumers are encouraged to file complaints by visiting the Office’s website or calling 1-800-771-7755.