The growing gift card racket

My wife Amy purchased a gift card for our daughter at Sephora, the large retailer of beauty products, but all she got was disappointment. When Stephanie tried to use it the clerk informed her the card had a $0 balance. No money.
It seems gift cards — growing rapidly in popularity — are increasingly subject to scams. Consumers lost over $250 million in gift card fraud last year, with such cases representing 25% of all FTC complaints.
That’s a fright for many of us who are used to the convenience of gift cards, which are sold not only directly through stores like Sephora, but also in supermarkets and pharmacies. Gift cards for hundreds of outlets — from Starbucks to Target, from Old Navy to Lowe’s — are handled by thousands of unaffiliated retailers. It’s estimated that fully half of all Americans have at least one gift card in their possession at any given time.
This month, seven men were arrested in New York State in a $20 million gift card scheme. “This is one of the largest money laundering cases my office has prosecuted in my time as district attorney,” said Nassau County’s Anne T. Donnelly.
A few weeks earlier, the Department of Homeland Security announced that it was “teaming up with federal, state, tribal and local law enforcement to identify, disrupt and dismantle Chinese organized crime groups engaged in gift card draining scams.”
According to federal officials, here’s what all-too-often happens:
Organized crime groups hire “takers” who steal unactivated gift cards from stores. The takers send the cards to colleagues known as “tamperers” who manipulate the packaging to gain access to the gift cards’ sensitive information. “Placers” put the repackaged cards back in stores, often in high-traffic locations.

The crime group’s “checkers” use tools, such as balance inquiries, to monitor when a consumer buys and loads funds onto the card. Once the card is funded and activated the checkers quickly transfer the funds into accounts in their control. The illicit gains are then spent on high-value products that are shipped overseas to be re-sold.
Organized criminals seem to like Sephora. Social media complaints go back over a year, yet many victims report frustration in dealing with the establishment. Sephora tells customers to call its sister company, LGCS Inc., for all gift card issues. And then there’s this disclosure on the back of the card, which states, “The value of this card will not be replaced if the card is lost, stolen, altered, destroyed or used without authorization.”
Maryland recently became the first state to pass a law specifically addressing gift card fraud.
If you do purchase a gift card, the sooner it’s used, the safer it is. Also, paying with a major credit card offers some protection. After Sephora flat out refused to help Amy, she managed to get a refund from her credit card company.
It would be nice if retailers like Sephora took the matter more seriously, rather than chalking up gift card fraud to the inevitable cost of doing business in these twisted times.

Copyright 2025 Peter Funt distributed by Cagle Cartoons newspaper syndicate.