With Gift Card Scams on the Rise, New Report Urges Reforms

WASHINGTON—’Tis the season for gift card scams. Fraudsters bilked U.S. consumers out of more than $230 million in 2021, and holiday shoppers are among their most frequent targets. To better protect consumers from gift card fraud, a new report from the Center for Data Innovation calls on Congress and the Federal Trade Commission (FTC) to encourage better security and liability protections for gift cards, increase public awareness of gift card scams, and improve data collection on incidents of gift card fraud for law enforcement agencies.

“Gift card fraud has become an increasingly sophisticated criminal racket,” said Becca Trate, a policy analyst at the Center for Data Innovation, who authored the new report. “Consumers like gift cards because they’re flexible. You can get them anywhere and use them anywhere. That’s why criminals like them, too. But policymakers can turn the tables by creating stronger protections for consumers and ensuring law enforcement has better data to crack down on scammers.”

Though the FTC launched a “Stop Gift Card Scams” campaign in 2020 to raise public awareness of gift card fraud, total losses nearly doubled in 2021. The Center’s report notes that scammers have stolen more than $430 million from American consumers in the last three years alone.

The new report reviews the most common types of gift card scams, the impact on consumers, and the current policies to protect consumers and track fraud cases. The Center concludes policymakers should adopt four measures to address the growing prevalence of gift card scams:

• Congress should update the Electronic Fund Transfer Act (EFTA) to treat gift cards like debit cards, which would encourage companies to implement proven security features to protect against liability.
• The FTC should introduce digital alerts on point-of-sale systems to increase awareness of gift card scams at the point-of-purchase.
• The FTC should launch a data-sharing pilot program designed to increase the number of data contributors to its Consumer Sentinel Network.
• The FTC should break out data for payments by virtual, mobile, and physical gift cards on Sentinel.

“It’s important to recognize the policy gaps that scammers exploit to perpetrate fraud,” said Trate. “We can close gaps with improved data collection, more gift card security, and better public awareness campaigns that reach consumers at the point-of-purchase to prevent victimization before it happens.”

Read the report.