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Why Gift Cards Are Gold Mines for Scammers, Part 2

We delve into whether retailers’ efforts to combat gift card fraud are successful

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Full Transcript


[00:00:01] Bob: This week on The Perfect Scam.  

[00:00:02] Marti DeLiema: The really concerning cases were when the cashier turned to my secret shopper and said, "You know, we have a limit. We can only do up to 200 on this card, so what we can do is we can split your transaction." And so they were identifying ways to serve their customer by helping them with what the request was, but really, it was overcoming the controls that were put in place to protect against fraud.   

[00:00:25] Bob: Uh, they were helping the criminals in effect.   

[00:00:27] Marti DeLiema: Yeah, in effect.   


[00:00:33] Bob: When a frenetic consumer shows up at a store looking to buy thousands of dollars in gift cards, sent there by criminals as part of a scam, what happens next? How hard do retail stores try to stop transactions when shoppers, many obviously under duress, try to buy gift cards as part of the scam? Thanks to a secret shopper experiment conducted by University of Minnesota researchers, today we'll tell you what goes on behind the cash register when gift card fraud shows up at the store. Welcome back to The Perfect Scam and this special two-part episode in gift card fraud. I'm your host, Bob Sullivan. Americans report theft of 50 million dollars via gift cards every three months. And that's just the theft that gets reported, but colorful plastic cards are a quick, easy gift for many consumers, but they've also turned out to be a gift for criminals who love their anonymity and the fact that it's nearly impossible to reverse gift card transactions. Last week we heard from a series of gift card fraud victims, there are many, who manipulated by criminals to buy gift cards and then send the value to the criminals often by reading the numbers on the card or sending an image of the card via email. But today, we're going to talk more about the systems that enable widespread fraud, and what can be done to fix that. We begin with an incredible experiment conducted inside stores a few months ago.  

[00:02:07] So, the study came about because we know that gift cards are the number one method that fraud criminals are requesting from their victims as a method of payment. So we really wanted to explore what's going on in the retail environment, and, you know, how is this fraud actually taking place like on the retail floor. And what are the perspectives of retailers.  

[00:02:30] Bob: That's Elder Fraud Expert and University of Minnesota Professor, Marti DeLiema.  

[00:02:36] Bob: The idea of doing say secret shopping for example, where did that come from?  

[00:02:42] Marti DeLiema: So we knew just anecdotally that many victims are going all the way through the process of buying, you know, thousands of dollars in retail gift cards without raising any red flags. And we wanted to see, you know, how does that experience play out in practice? Do retailers step in and do they say anything when the par--, individual trying to purchase, you know, 400, 1,000 dollars' worth of gift cards as a young adult or a young person versus an older adult. So I think the idea of secret shopper was, you know, let's put these theories to the test. Is this really happening, what's the prevalence, and also, if people do stop us, what are they going to say?  

[00:03:25] Bob: Here’s how Marti designed the study which was funded by AARP.  

[00:03:30] Marti DeLiema: My graduate students and I selected from several of the largest retail companies in the United States. There were some parameters. We weren't going to hop on a plane, so they had to be local retailers to the Twin Cities area. And our plan was to have two people go into the store. One person was assigned the role of secret shopper, and the other person was assigned the role of support shopper. The secret shopper was the one who was going to grab the gift cards off the kiosk and go into the checkout aisle and try to purchase the cards, and the person behind them was the secret shopper, and they would be observing the interaction. And we're really happy that we made that decision because a lot of the information that we gained from doing this procedure was based on what we learned from the support shopper, because they could listen to the interaction between the cashier and their manager after the secret shopper had already left the store. So of course I wasn't doling out a thousand dollars to my graduate students to actually purchase these cards. Instead what we did is we had them say the line, "Oh, I'm so sorry, I left my wallet at home. I'll have to come back." So they never actually purchased the cards, but if they were allowed to go all the way through with the transaction, and they were not going to be stopped, that was their exit line, and then they would leave.  

[00:04:56] Bob: The researchers worked hard to make sure the experiments were fair.  

[00:05:00] Marti DeLiema: Before we go on, I do want to say some of the procedures that we built in place to try to avoid bias, because I knew that when we walked in, we might say, ooh, let's try the older adult cashier, maybe they are going to stop us or oh, I bet that young man over there is not going to notice. So we actually rolled the dice to figure out which checkout line to go. So we had 20-sided die so for like the very large you know supercenter type stores, you know, just a 2-sided dice for the, for the smaller ones like the Walgreens and the Rite-Aids that the small pharmacies that don't have a lot of checkout lines. And whatever the dice rolled, that that was the checkout line that we chose. So that way we weren't choosing where to line up, it was chosen for us. We also used a die role to choose what type of gift card we were going to purchase, because different criminals ask for certain types of gift cards more than others, so we chose about four, and we used the die to choose which of the four we were going to attempt to purchase.  

[00:05:59] Bob: So, Marti and her students set out to simulate an actual ongoing gift card crime. A typical situation, the kind of crimes we demonstrated last episode. So a consumer gets a call from someone they believe works for the IRS. And that person demands the consumer go to a store and buy gift cards to pay off a tax debt. At first, the role-playing isn't so easy.  

[00:06:24] Bob: What was it like personally for you to walk up to these checkout counters and try to buy these gift cards? How did it feel?  

[00:06:32] Marti DeLiema: Well, we were so nervous in the beginning, you know, our hearts are beating really fast, we're shaking, and you know, we had each other, and I was thinking, oh, is this the right thing to put my graduate students through, but you know, that actually probably reflects the experience of a consumer who's being targeted by fraud. You know, they're, they were just threatened, they think that they might owe money to the government or someone else, so they might also have this high state of emotional arousal of fear. So it might have been actually a more accurate representation of how this happens, but you know, by the third or fourth time, you're so relaxed, and you don't even, it's, it's just second nature. So it's only kind of spooky and scary and, and you know, your heart's beating fast in the beginning.  

[00:07:16] Bob: So after a while, the team gets good at running these simulations. They quickly discover it's easier to buy high value gift cards at some places than at others.  

[00:07:26] Marti DeLiema: So, the typical scenario is the secret shopper goes up there, hands over the gift cards, says how much they want on each one. And the cashier usually tries to enter into the amount and activate it. In some cases that worked, and that was all that it took, and the person could easily check out. But then But then in many other cases, there would be a restriction on the amount that the customer, the secret shopper could put on that gift card.  

[00:08:02] Bob: There are limits, Marti's team found. Limits on the dollar value cards that can be purchased. Limits designed; it seems to stop high dollar fraud. They're different at each store, at some places $250, at some places $500, and so on, but the limits don't actually work the way they're supposed to.  

[00:08:22] Bob: So some stores say you can only put $500 on a card and some stores say you can only put a thousand dollars, but there are limits; your shoppers ran into them, so there was a speed bump, but that speed bump in, in all these cases didn't actually stop the attempt at fraud, right?  

[00:08:39] Marti DeLiema: Exactly. And the really concerning cases were when the cashier turned to my secret shopper and said, "You know, we have a limit. We can only do up to 200 on this card, so what we can do is we can split your transaction." So they were essentially suggesting to my secret shopper or the customer, that you know, I can't put all $400 on one transaction, but we can kind of assume that you're two separate customers, and we can do 200 on one, and then 200 on the other as a new, open a new transaction. And so they were identifying ways to really, you know, serve their customer by helping them with what the request was, but really, it was overcoming the controls that were put in place to protect against fraud.  

[00:09:21] Bob: Uh, they were helping the criminals in effect.  

[00:09:23] Marti DeLiema: Yeah, in effect.  

[00:09:26] Bob: And circumventing the fraud protections.  

[00:09:28] Marti DeLiema: Right.  

[00:09:29] Bob: But there's another factor about the way gift cards are sold which makes things even easier for criminals.  

[00:09:36] Bob: You said something else that just screamed out at me from the report which is the problem of self-checkout lines. Why are they a problem?  

[00:09:44] Marti DeLiema: So in self-checkout lines, you, you lose the personal interaction with a cashier, and really, the times that we were stopped, it was because the cashier or their manager was aware of gift card fraud, and wanted to ask us additional questions, you know, had some suspicion. And when you have a self-checkout there's no person there to really notice that something is suspicious, so I could split the transactions on my own.  

[00:10:14] Bob: I hadn't even considered the problem of uh someone who's under duress being directed to buy gift cards to pay a criminal in a fraud and then being able to go into a store and not even talk to a human being and buy those gift cards. That seems, uh, that seems like a terrible state of affairs to me.  

[00:10:31] Marti DeLiema: Right. And if people do try to pay with credit cards, sometimes they're stopped. So that is a safer payment mechanism, and fraudsters recognize that, so what they usually tell people is that their first stop in their journey to victimization is to go to the, an ATM, or go to their bank and withdraw as much cash as possible. So usually, typically customers are playing, paying with cash.  

[00:10:58] Bob: And so and now this is, I think this is a really important image for people to understand. So you've got someone at a self-checkout line uh and, and your example, I'm sorry, how, how much were they trying to load onto the cards?  

[00:11:10] Marti DeLiema: So we tried to load between 400, that was in the beginning, and then we weren't getting stopped, no one was saying anything. So we said, let's up the ante. Let's make it, you know, 800 or 1000. So you know it was between 400 and 1000 dollars that we were attempting to purchase in gift cards.  

[00:11:28] Bob: Wow, and I, I know you didn't gift them $1000 in cash, but in, in the other example which is typical, someone goes into a grocery store or in a drugstore with a, you know, ten crisp $100 bills and feeds them into a self-checkout line and walks out with a couple of these gift cards to then give to a criminal in the, in the parking lot in their car or whatnot. That just sounds like such a painful image to me.  

[00:11:49] Marti DeLiema: It is, because it seems like there's so many opportunities to stop this person before that happened, both controls on the card and at the checkout line, and more warning signs in the stores, it was really shocking to us as well.  

[00:12:03] Bob: Marti's findings weren't all bad news. Some stores did attempt to step in when the secret shoppers tried to buy unusual amounts on gift cards.  

[00:12:12] Bob: To put a silver lining on things at the beginning, because I'll get to the dark cloud later, I was surprised to hear that half the stores had warning signs, and two-thirds of the cashiers said they had had some kind of training. That actually seemed kind of optimistic to me. What do you think?  

[00:12:32] Marti DeLiema: Yeah, you know, it's challenging to know the extent of their training. So those results, at least the, yeah, the results that you're citing actually came from a follow-up survey where we sent out a survey to about 300 cashiers who participated online. So we don't know if the individuals that we interacted with in these Minnesota stores, if they ever had training, and also what the extent of that training was. It could have just been a couple of, you know, warning messages from managers or just a, a mention about gift card fraud. It's also not clear what type of gift card fraud they were trained on, because a lot of people, when we began their interviews with cashiers and managers, they said that it was actually, they were trained on how to identify someone who's using a fraudulent or a stolen credit card to purchase gift cards. So that was the kind of fraud that they were trained to look out for, not the type of fraud that we're, we were interested in, which is an external, you know, fraud criminal is telling someone to purchase a gift card with their actual personal credit card or cash.  

[00:13:38] Bob: So that, that's an important distinction. They were trained to prevent stealing from the company, not stealing from the consumer.  

[00:13:44] Yeah, they might have been trained to look for stolen credit cards, but definitely not understand if someone is quote unquote like under duress to purchase a gift card. 

[00:13:54] Bob: The stores do work to protect themselves from fraud, but not as much to protect consumers from fraud, the study found. And that fits with what the Minnesota researchers found in part two of their study, Marti just alluded to it. After the secret shopping experiment, they interviewed store employees to learn more, and what they learned was, well, store managers have a lot of people to keep happy, most of all, their bosses. So some of the things retail workers told the researchers were shocking. Well, this part of the report I read twice.  

[00:14:29] Marti DeLiema: When we interviewed managers to ask them about their perspective of gift card fraud, they understood the problem, but they also expressed to us their competing priorities. And one of their priorities is to keep the line moving. So to really educate a customer and tell them, you know, I'm concerned about the amount of the quality of gift cards that you're trying to buy, you know, it takes empathy, it takes not being judgmental. They all said you can't just jump right into those questions; you have to warm them up, you have to say, "So how's your day going?" Or you have to ask, "So wow, this is a lot of gift cards. Who are these for?" All of that takes a lot of time. Trust building takes time. And what they say is that can create like a longer line building up behind this person who is trying to check out. So you can see that if the store is packed, they're going to choose that priority of keeping the line moving, you know, maximizing profits for the retailer, rather than taking this person aside, sitting them down, understanding what's going on in their life, why they were told to buy these gift cards. It's a lot of effort.  

[00:15:40] Bob: A lot of effort and you can, there's always tension around long checkout lines, right. So I mean you can, everyone's shoulders drop the second someone says, "Can I get a price check," right? So, so you can see how this would be a hard thing, both for the cashier and for a manager.  

[00:15:58] Marti DeLiema: Yeah, definitely it's a hard thing. Of course, not all managers felt that way. Others, you know, saw this really as a priority to protect people. But they were also aware that sometimes customers are not pleasant when a cashier tries to intervene in their purchase. I mean when does that ever happen? When does a cashier ever turn to you as a customer and said, "I don't think you should buy this." That never happens.  

[00:16:23] Bob: Right.  

[00:16:23] Marti DeLiema: So, to ask them to do that, that is so outside of their typical scope of duties and, and culture of the store that it was a big ask.  

[00:16:34] Bob: It, it's a big responsibility and, you know, one of the quotes in here said, you know, "We're paying them $15 an hour. They're not going to be detectives for this," right?  

[00:16:42] Marti DeLiema: Exactly, exactly.  

[00:16:45] Bob: And somebody else said, you know, I'm not getting fired over this.  

[00:16:48] Marti DeLiema: Right, right. It really comes down to the fact that there is a culture in retail that the customers is king, and you know, you, your job is to provide for good service to a customer. Your job is not to question their purchases, and your job is definitely not to protect them from crime.  

[00:17:09] Bob: Yeah, there was another comment that I read, and I don't have it in front of me, but it was along the lines of, you know, how many times can I tell someone it's a scam when they don’t believe me. At some point, you know, it's their money. I have to let them spend it.  

[00:17:20] Marti DeLiema: They also did express that they're concerned about combative customers, and people pushing back, and yeah, kind of hitting a wall with some people that they just are stalworth. They want to purchase these cards, and nothing that the retailer can say, or the cashier is going to say is going to stop them. And we've heard that before. So it really, it's a lot of responsibility to place on the shoulders of frontline workers, low paid frontline workers in retail settings.  

[00:17:50] Bob: There were specific examples of retail workers stepping up and doing the right thing.  

[00:17:54] Marti DeLiema: So once one of my graduate students was stopped by the cashier, and it was the cashier herself who was extremely worried about the individual. She said to my graduate student, she said, you know, "This, I'm really, I'm really worried about this. This is a lot of, you know, a lot of money. There's these scams out there, this is what they say." So this person really knew about what was going on. And she said, "You know, this happened to my friend." She was even using her personal experience to try to educate my graduate student about wanting not to do this. And of course we went through the protocol and then my graduate student said, "Oh actually I left my wallet in the car," and so she left and went back to the car, and the cashier was so concerned that she called security, because she wanted security to educate further my graduate student. Of course, no one was in trouble, there was no crime being committed, but she was, she was concerned, and this was all observed by the support shopper who was standing behind her in line. And even the support shopper, she said the woman behind her in line started having conversation with the cashier. "Oh, this happened to me not long ago. I lost a lot of money." So it was like it created this whole conversation in the line about people who have experienced fraud, but ultimately, you know, there was no incident. Everybody left, no one, you know was spoken to by security, but it just shows that it's on the individual, this one cashier knew so much more about these types of scams, really, bad was really passionate about it and really wanted to protect the customer from, you know, having a bad outcome.  

[00:19:31] Bob: But a majority of the time, the researchers would have been able to complete the simulated scam purchases with little trouble. It was a small sample size, but two-thirds of the transactions would have been completed had the researcher actually plunked down the cash. Now, that's not to say stores aren't aware of the problem, quite the contrary. The researchers spotted warning notices and their consumers in 80% of the stores. Some were printed and pasted right next to gift card kiosks, some were integrated into point of sale systems, but there were plenty of warnings; they just weren't all created equal.  

[00:20:09] Marti DeLiema: Well, first I want to start telling you about the signs that we thought were not effective. So some of them had the scam warning in size, I swear like 11 point font, way above eye level, and just impossible to see in the midst of all the other heavy branding and design surrounding those signs. So that was ineffective in my opinion. And other signs that were ineffective were signs where there was so much clutter all around it, so there were so many other, you know, there's gift card brands everything, and the sign itself was about the size of a gift card, and it just blends in, it just blends into the background. The better signs were the ones that were actually, in my opinion, more homemade looking, you know, printed out on a computer printer, on computer printer paper and just, you know, taped to the gift card kiosk. And I think that's effective because it just really stands out among all the very clean, you know, clutter of other gift cards that are heavily branded.  

[00:21:20] Bob: To stick up for the stores just a little bit here, it also strikes me that no store wants to put up a sign that basically says, there's crime in this area. That, that, you know, when you see that in the parking lot it always makes you do a double take, right, and so I'm, I'm assuming the stores are a bit reticent to put up the word crime anywhere near their customer experience, right?  

[00:21:41] Marti DeLiema: Right, and signs take up valuable real estate for the store. Instead of putting a, you know, an 8 1/2 x 11 sign, you know, you can have, you know, six more gift cards in that spot.  

[00:21:56] Bob: So how should consumers interpret the results of Marti's study?  

[00:22:01] Bob: Should they be mad at the store, should they be mad at the system?  

[00:22:05] Marti DeLiema: I think no one should be mad at the individual cashier who has so many job responsibilities and so many competing demands on their time for not understanding the risk that this person is facing by trying to purchase gift cards. You know there's always this question of who do we blame? You know, and, and I think the blame should always, always be squarely placed on the shoulders of the criminals who are perpetrating these crimes. So, you know, don't be mad at the store, but stores do need to have conversations with their customers.  

[00:22:42] Bob: Are cashiers being trained to have these conversations and being trained in other fraud fighting techniques? 

[00:22:49] Marti DeLiema: We never debriefed the participants, or I should say cashiers. This was part of their everyday, normal, you know, behavior and job responsibility, so we weren't trying to interfere with their day, but you know, at all, as part of the research. But we did learn quite a bit from, from doing this kind of live and really testing the controls that exist out there, because retailers can say that they're doing a lot of things, but if it's not kind of trickling down onto the frontline, the cashiers and clerks, then it's not effective.  

[00:23:20] Bob: What would be effective? After all, it is asking a lot of cashiers to become fraud experts. And Marti's study shows whatever we're doing now isn't really working, at least not working well enough. One thing we know that does work is AARP’s BankSafe training – a free program that’s been used for several  years by financial institutions to train front-line employees in the variety of skills needed to spot financial exploitation. Independent research has shown the training does help reduce fraud and in May of this year, AARP announced a version of BankSafe designed for retailers, so their employees can spot and stop gift card and wire-transfer exploitation. It includes 15-minute courses comprised of 11 activities with interactive videos, gamified elements, a resource library full of tools and assets, and much more. And again, it’s free to U.S. retailers. My next guest thinks even more could be done on a systemic level to take a bite out of gift card fraud. Amy Nofziger, AARP's Director of Victim Support, monitors the thousands of calls that come into the Fraud Watch Network Helpline every month, and she knows at the end of so many tragic fraud stories, romance scams, virtual kidnapping scams, IRS agent scams, gift card fraud is the engine that makes all these things work for the criminals. So, she's been screaming about gift card for a long time, and well, for too long, frankly.  

[00:24:49] Amy Nofziger: So I joke, I've I’ve been here 20 years and I will stay another 20 years to see this gift card problem solved, but hopefully it won’t take that long. 

[00:24:57] Bob: I hope it doesn't take another 20 years to fix it.  

[00:24:59] Amy Nofziger: I do too. I do too, it's sort of like kids, right, 'cause they'll, but then it'll be their grandkids going to the store with me saying, "Grandma, stop yelling about gift cards.  

[00:25:09] Bob: While we often depict the plight of individual victims here at The Perfect Scam, so people really understand the human suffering endured by innocent people caught up in financial fraud, it is important to take a step back and look at the scale of scams that are happening. Hundreds of millions of dollars in reported gift card fraud every year now. 

[00:25:29] Amy Nofziger: Well that's only what was reported, right, that’s only what was reported. So again, you can take that number and we're up into the billions and that money is leaving our economy and going over to criminal enterprises. I don’t know why we’re not doing more.  

[00:25:47] Bob: Why is gift card fraud such a tough problem to solve?  

[00:25:50] Amy Nofziger: I just think that the desire's not really there. It’s a very complicated in, in my opinion, industry. Who owns the majority of the responsibility? Is it the manufacturer of the gift card, is it the entity that sells the gift card? Is it the brand on the gift card? Is it the consumer? So I think it’s just a really large problem to solve, and I also think people don’t really know that much about it, even though, as you said, it’s a 25-year problem, it’s really just in the last handful of years that it’s really been coming into the spotlight as one of the most preferred ways for criminals to transfer money. 

[00:26:33] Bob: Amy has a knack for explaining just how deep, how widespread the problem is.  

[00:26:39] Amy Nofziger: You know, I think sometimes expressing it with the, the billions of dollars, people’s heads just spin. Right, so sometimes I’ll even just say, it’s like, okay, yes, it’s a billion dollars. But let’s just take your local grocery store. So next time you walk into your local grocery store or your local pharmacy, and you see that very innocent looking gift card rack there with the colorful plastic cards on it, look at it. Look for a warning sign. See what it says, and then in your mind start having dollar signs pop up. In that store right there, just estimate that in the last year $50,000, $60,000 was lost at that store. Or, you know, even take one of the victims that I already mentioned who lost $10,000 in these Google Play gift cards that she bought at a home improvement store. She went to six home improvement stores across her area and bought all of these gift cards. She has $10,000 worth of them. She realized she was being victimized, and then she still has those $10,000 of Google Play gift cards. Right, so sometimes the numbers are too big, and you want to bring it locally. Think of her. Think of your local store and then think about how many times you walk into a store and see those gift cards. I think that’s what really resonates with people is when you see those in your stores, and you see in your mind how much money is being lost in those. It does bring it closer to home and it helps people focus on it a little bit more. 

[00:28:15] Bob: And focus, Amy says, is going to be necessary to start getting a grasp on gift card fraud.  

[00:28:21] Amy Nofziger: I think we do need passion when it comes to this problem, because I think, you know, again, how many of us just go through our daily lives and see that gift card rack and don’t think two seconds about it unless we need to buy a gift. Now we can look at it as, you know, a very detrimental thing to our community and our, our economy in the amount of money that is being lost from there. Where else in our daily lives are billions of dollars being lost to criminal enterprises, and we’re not screaming from the top of our lungs about it? You know, there really it… we would be screaming, but for some reason with these gift cards we’re not. 

[00:29:01] Bob: So see a gift card rack and look at it as some kind of dangerous, financial instrument, right? 

[00:29:07] Amy Nofziger: Absolutely. Ticking time bombs. And it’s not, you know, necessarily if it will happen to someone in your life or your family; it’s when it will happen to someone in your life and your family. So that’s why we all need to start paying attention to it now. 

[00:29:20] Bob: Ticking time bombs. I asked Amy when gift cards really became the preferred tool for criminals, and it probably dates back to when federal authorities clamped down on what used to be criminal's preferred way of stealing money over long distances. Wire money transfer services like Western Union, a series of lawsuits and other crackdowns during the early part of the last decade made wire transfers a lot less attractive to criminals. So, they turned to gift cards.  

[00:29:49] Amy Nofziger: It's hard to say kind of a time wise, you know, was it five years ago, 10 years ago, because I've been here so long, but the trend that I noticed is that it was taking over the spot of wire transfers. So that’s when I kind of thought, okay, so we’ve kind of solved the wire transfer problem of MoneyGram, Western Union, preferred method of criminals; now we’re moving into this new frontier of these prepaid gift cards. So it’s certainly been a while, but it’s hard to place, you know, an exact date on when I saw the spike. 

[00:30:26] Bob: But whenever it started, gift cards and other stored value plastic cards have now become ubiquitous, seemingly in every store beginning maybe a decade or so ago, and they quickly replaced wire fraud as a tool for moving money so it couldn't be traced.  

[00:30:41] Amy Nofziger: Yeah, I mean the criminals are always looking for the next way to, to get their, to get their loot, to get their money, right, and they’re always looking for ways that are easily accessible. And so if you think about prepaid gift cards, they’re everywhere. They’re at every grocery store, pharmacy, department store, home improvement store. You can buy them online, you can buy them at gas stations; everywhere you are a consumer, you’re usually faced with a prepaid gift card, so scammers know that. They are also untraceable, right. There are hardly any ways that you can trace where the gift card went to. If I go to Target, I can probably buy a Walmart gift card at Target. If I walk into a CVS, I could probably buy a Nordstrom’s card. Again, I think we’re making it very easy for consumers to buy these, but again, we’re making it very easy for criminals to get consumers to buy these. 

[00:31:39] Bob: As Marti's team witnessed, criminals play a cat and mouse game retail outlets that sell gift cards. When clerks do try to stop consumers with questions, criminals are often right there with the answers. That's why training cashiers might help, but only so much, Amy says.  

[00:31:57] Amy Nofziger: It's not going to stop all, because I've actually talked to victims where there was some sort of person or salesclerk intervention, and you know, they’re told, the victims are told to lie a lot of the times from the criminals. They’ll say, “If somebody asks you why you’re buying this, say it’s for a wedding present for somebody. Because if they find out you’re buying these for your, you know, debt or whatever it is, you’re going to be charged a tax.”  

[00:32:23] Bob: That's why Amy is focused more on systemic fixes to the gift card transaction chain. One easy fix she says, "Allow consumers who spot the fraud halfway through the crime to get refunds." In the first part of this episode last week we told the story of two victims who realized they were being deceived after they'd purchased the gift cards, but before they transferred the value to the criminals, and they were left holding the store gift cards. They couldn't exchange them to get their money back.  

[00:32:53] Amy Nofziger: I mean we'd have so many instances where somewhere along the victim’s fraud journey, they, you know, realized that they’re, you know, being victimized. They already have the gift cards purchased, but they don’t give the numbers or the pin to the criminals. And so, oftentimes people think that you can take those Google Play cards, whatever it is, back to the retailer that you purchased them from, or even to the brand of the gift card, but you can’t. Gift cards are nonreturnable, and so for many people, they are then left with $300 worth of Google Play gift cards that they have no need, desire, or even knowledge what those gift cards are for. And then, they’re out of that money too. So he’s out the $300 that he either paid cash or put on his credit card, and he has $300 worth of gift cards that he has no need for and can’t use to then pay back the $300 debt. So again, it’s a very, very hard thing for these victims. It’s almost like they’re double victimized in these situations.  

[00:34:03] Bob: So there won't be a single simple fix to the problem, but there sure seems like some obvious things to try, Amy says. 

[00:34:10] Amy Nofziger: You know, most times when someone is purchasing a gift card for legitimate, valid reasons; for a gift, for a, a, you know, token of appreciation, if you’re buying it at, you know, 10 a.m., the recipient is not cashing it out at 10:01 a.m. Right, and so again there, there should be some technology in place with algorithms, et cetera, that can see that purchase happen so fast and make assumptions about where that gift card and where those funds were obtained.  

[00:34:45] Bob: The question is, who would implement such a change? The gift card transaction process is not quite so clear. 

[00:34:53] Amy Nofziger: Yeah, so you have your manufacturer of the gift card, and there’s, in the United States there’s about 2 big players in the manufacturing. And one that actually prints the numbers and the brands on the gift card. Then you have the store that sells the gift card, whether that’s a grocery store, a pharmacy, a home improvement store. And then you have the brand of the card, like you said, Target, who the money is loaded onto it, and then ultimately where the purchase most likely happened. And so, you know, where’s the incentive necessarily to, to stop this? Yes, I get that it might be bad for the brand of Target, but Target’s, you know, and, and I feel like we’re picking on Target here, but it’s all of them, but they’ll say, well, you know, we didn’t sell it to them. They sold it to them. They just put the money on our card. How are we supposed to know that it was purchased, you know, in a scam? And then ultimately the end, the company is the one who, who had that item purchased from them, whether it’s a TV, a stereo, food, whatever it is, and so that goes on their books. So it’s a very hard, you know, process, it’s a hard journey to say, okay, where does the buck stop? Who owns responsibility of it? And right now, the responsibility of all of these gift card frauds falls on the consumer, and they are the ones out the money. 

[00:36:16] Bob: What other changes might help consumers? First off, higher barriers. After all, consumers are certainly used to encountering barriers when purchasing many products like cigarettes and alcohol. 

[00:36:28] Amy Nofziger: Think about every place in your life right now where there is a barrier to something, right, and it’s mostly these barriers, whether it’s, you know, tobacco, paint, medicine, you know, seat belts, like whatever it is, there are places out there that we have to do things to keep us safe. 

[00:36:48] Bob: What kind of solutions would she like retailers to implement on the back end?  

[00:36:52] Amy Nofziger: If you are a victim and you purchase a gift card and realize that this is part of a scam, we need to have better support for these victims to get a hold of the, the, the gift card entity to stop that transaction or to get the money back. If you turned your gift card over and you call the toll-free number on the back of the gift card, you are often met with a phone tree that never connects you to a live person to even say, I purchased this gift card as a part of a fraud, can you stop it? And then finally, what I would love to see is, you know the, the behind the scenes technology of, you know, if someone purchased a gift card in Denver, at, you know 10:01, and now that gift card is being used in Washington State at 10:02, what can we do to slow down that transaction, because obviously, I think obviously, that it has been sold on the Dark Web, it has been transferred to another criminal, and they are purchasing, you know a, a television or electronic with these ill-gotten gift cards. 

[00:38:04] Bob: It's important to recognize that speed here is the friend of the criminal and the enemy of the consumer, particularly because customer service can be slow.  

[00:38:14] Bob: Something else you said, was consumers are frustrated when they call the number on the back of the card. They often don’t get a human being; they get stuck in an infinite phone loop. It, it strikes me that every second counts in a situation like that, right? 

[00:38:27] Amy Nofziger: Yeah. Oh, absolutely. Absolutely it counts. During um, I haven’t called it recently, but during COVID, again, as part of my, you know, consumer protection shopping around, embarrassing my children, I went into a couple of stores because I just always, you know, I’m shopping around and seeing what’s happening. And I called one of the numbers on the back of a very well-known brand of gift card, and it said, “Thank you for calling. Due to COVID, we have nobody picking up the phone right now.” And it clicked off. So if you are a consumer in that moment and you realize you’re a victim of a scam, maybe five minutes ago you gave the criminal the pin and the number on the back, and you want that gift card company to stop it, to stop it, to, to put a hold on those funds. You’re screwed. No one’s picking up the phone, or you’re in a 10-minute phone tree to find out what to do. Or they say, go online.  

[00:39:24] Bob: And in the meantime, on the other side of the keyboard is a system that is doing its best to wring every dollar out of those cards as quickly as possible in the moment… 

[00:39:33] Amy Nofziger: Absolutely. 

[00:39:34] Bob: It’s gone, it’s gone. 

[00:39:35] Amy Nofziger: Absolutely. It’s gone. 

[00:39:36] Bob: What an unfair race against time it seems to me. 

[00:39:39] Amy Nofziger: Absolutely. I mean the criminals are so adept at draining the funds off of these gift cards. I mean they have a whole network set up where you know, I walk into the store as the victim. I load, you know, $10,000, or however much on all of these play cards. I take a picture of the card. I text it to them. It’s gone. I load the money on the card, I give them the numbers off the back verbally, I give them the pin; they do what they do with it, and it’s gone. Right, there isn’t a second to spare. So when the consumer does realize this and does need quick intervention, it’s also not there for them. 

[00:40:20] Bob: After her very personal secret shopping experience, and the other research she's done, Marti DeLiema has a few suggestions for how to fix the system too.  

[00:40:30] Marti DeLiema: So there's suggestions, you know, can kind of be grouped into different categories. So for, for the retailers themselves, the organizations that are selling gift cards, usually you know, gift cards, they're own gift cards, but gift cards from other retailers, they need to do more with education. So one of the managers that we spoke to said that he still remembers the human trafficking educational uh videos that he was required to watch for his job as a manager at a, at a major retailer. So if we can train cashiers to be able to identify other extremely sensitive and dangerous situations like human trafficking, why can't we also share little videos or do little, little training modules with them to teach them about gift card fraud? So that's one thing is training. The second is the controls that they can place around the purchase levels of gift cards. So, you know, anyone buying multiples of gift cards, especially in high denominations, that's a reason to ask questions. And by asking questions, it doesn't mean you're going to block that customer from actually purchasing those cards, it just means that you are now required to ask them a series of questions and then make a judgment call about whether this is a scam or not. So just building in those extra stops, those extra minutes for the customer to pause and think about what is, about what they're about to do.  

[00:41:55] Bob: Coincidentally, about a season ago or so, I interviewed a woman whose mother had been a, a victim of gift card fraud, and she actually at that time was responsible for training cashiers at her store about gift card fraud, and she was personally rather passionate about it, so it was a very frustrating situation for her, but I, I loved talking to her about her training, and you had a line in the report that really stuck with me. There was someone who said, you know, I, I think of these people like it might be my grandmother, and so I really want to do right by them. It, it does seem to me like in the end, that's the kind of hand-to-hand combat that has to be done to, to fight gift card fraud. People have to see others as, as human beings they care about, right? 

[00:42:39] Marti DeLiema: Right, and it could be them, you know, as we saw from my interviews with managers, many of the managers themselves have been victims of the gift card scam. So, it's, it's all of us. We are all vulnerable to some form of fraud where the storyline might be different, but the method of payment is a gift card.  

[00:42:56] Bob: And to be blunt, stores could simply say no to consumers who seem to be under duress when buying gift cards. It's not as uncommon as you think.  

[00:43:06] Bob: You know, and this is probably a fantasy on my part, but if someone said, "I'm not sharing," you could say, "Well I'm not selling you these gift cards," right. That would be very hard for a store to do, but it does seem like they're, I mean I can see a small business doing that.  

[00:43:22] Marti DeLiema: So there's precedent for, for saying no to the customer, and that is in controlled substances; alcohol and tobacco. Cashiers do have the power to say I am not selling you this liquor. So if we can kind of place gift cards in that category of more controlled products, maybe we can help empower the cashiers to say no. Ultimately, what I think is that cashiers need to be told from their corporate offices, from leadership that if they believe that their customer is being targeted by a fraud, it is okay to deny that transaction, because it is in the best interest of their customer, which is ultimately their goal. So I don't think that asking a, a retailer to be able to stop a transaction is completely without any warrant. I think that there is a history of, of this happening with other substances. Why can't we do it with gift cards?  

[00:44:18] Bob: And who wants to go home at night thinking that they helped someone steal money from someone in your community, right?  

[00:44:25] Marti DeLiema: Right. I think it's easy for everyone to just shrug off, you know, well it's not my responsibility, you know. But if we try to encourage cashiers and retailers say you no, this, this is actually hugely part of your responsibility. Like this fraud couldn't happen if it weren't for you as the kind of the pipeline, the group that transfers the funds from A to B, then maybe yeah, maybe they would step in and do more.  

[00:44:49] Bob: All of us, every single person from retail clerks to concerned family members, to payment processing companies, we all need to take gift card fraud seriously to really get this crime under control. Thanks to Amy and the whole staff at the AARP Fraud Watch Network for helping us tell gift card victim stories in the first part of this episode. All those victims initially reached out to AARP by calling the Fraud Watch Network Helpline, and you can do that too at 877-908-3360.  


[00:45:10] Bob: Thank you to our team of scambusters; Executive Producer, Julie Getz; Researcher, Haley Nelson; Associate Producer, Annalea Embree; and of course, our Audio Engineer, Julio Gonzalez. Be sure to find us on Apple Podcasts, Spotify, or wherever you listen to podcasts. For AARP's The Perfect Scam, I'm Bob Sullivan. 



In Part 2 of this special report, we look further into the dark side of the gift card market, where criminals turn gift cards into a tool to steal money from unsuspecting consumers in a way that’s completely untraceable and irreversible. We’ll hear from University of Minnesota researcher Marti DiLiema, who conducted a study with undercover shoppers, and delve into whether retailers’ efforts to combat gift card fraud are successful. 

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