Gift card scams have emerged as a significant problem, leading to a surge in efforts by state lawmakers and attorneys general to combat this issue. In 2023 alone, card draining and other gift card-related fraud accounted for a staggering $217 million of the $10 billion lost to scams nationwide. Recognizing the severity of this issue, several states are proposing legislation aimed at strengthening consumer protections.
One common approach is to mandate secure packaging for gift cards. This would involve concealing the bar code and other activation information beneath tamper-proof packaging, making it more difficult for scammers to obtain this data and drain the cards after they are purchased and activated by consumers. Maryland has recently passed a bill along these lines, and it is awaiting approval from the governor.
Other states are focusing on increasing awareness of gift card scams. In New York, for instance, a new law requires retailers to display warning notices informing consumers about the potential risks. Rhode Island has implemented a similar measure, coupled with a $250 civil fine for non-compliant retailers. Delaware, Iowa, Nebraska, Pennsylvania, and West Virginia are also considering similar legislation.
While these efforts are intended to safeguard consumers, some industry groups have expressed concerns. The HospitalityMaine association, for example, has argued that such measures unfairly target retailers and do not provide meaningful protection for consumers. Similarly, the Retail Association of Maine has criticized proposed legislation for its overly broad scope.
In response to concerns about burdening businesses, some states, such as Maryland, have proposed alternative approaches. Maryland’s legislation, for instance, allows retailers to sell non-securely packaged gift cards if they are chip-enabled and numberless, requiring activation through the card issuer’s website.
InComm Payments, a prominent gift card manufacturer, has actively opposed these measures. Their packaging has come under scrutiny in California, where San Francisco has filed a lawsuit alleging lax security features that facilitate fraudulent access to activation information. InComm denies these allegations and maintains that their priority is supporting customers who have been affected by fraud.
