Visa USA Inc. is facing accusations of deceptive marketing and selling gift cards with serious and easily exploitable security vulnerabilities, allowing scammers to drain the funds.
In a Jan. 30 criminal complaint filed in the United States District Court for the Southern District of New York, the plaintiff, Ira Schuman, alleges that Visa knew its Vanilla gift card product was vulnerable to tampering and did nothing to protect its customers. Mr. Schuman also claims Visa refused to refund customers who complained about being scammed.
Visa Vanilla cards, sold at CVS, Target, Walgreens, and various other outlets, can be pre-loaded with cash and then used like debit cards to purchase goods and services. The cards can be used without access to a traditional bank account for both online and in-person purchases.
The specific vulnerability mentioned in the court documents refers to the packaging in which the cards are sold. Its alleged thieves can easily access a card and record its account number, expiration date, and CVV number, then reseal the package and return it to the sales rack without being detected. Scammers can track the card online, and once it’s purchased and loaded with funds, they can drain it.
‘Fraudulent Conduct’
When Mr. Schuman tried to report the theft, it’s alleged somebody working for Visa USA told him they couldn’t help and transferred his call to “an unknown bank” that provided him with a complaint form. Mr. Schuman says his concerns were ultimately ignored.“Defendants are aware of this problem and have failed to make necessary improvements to the security features of Visa Vanilla cards to prevent the known and widespread fraudulent conduct,” the court documents read.
“As a result, defendants have caused plaintiff and other similarly situated consumers to purchase a product, which is not secure and does not perform as represented.”
Mr. Schuman says the criminal complaint is being brought on behalf of anyone who bought a Visa Vanilla card after Jan. 30, 2021, and had the funds taken. At this stage, Visa is only accused of violating a single count of New York’s general business law.
Compensatory damages, statutory damages, punitive damages, restitution, attorney’s fees and costs, and pre-and post-judgment interest are all being sought. No trial date has been set, but Mr. Schuman has requested a jury trial.
During the last holiday season, authorities issued a warning about the rise in the scam known as “card draining.” According to the Federal Trade Commission data spotlight, in the first nine months of 2021, consumers reported losing $148 million in gift card scams. Last year, losses spiked to over $228 million, with 73 million Americans reporting losses due to gift card scams.
The Epoch Times has contacted Visa USA for comment on the criminal complaint and allegations.
