Strategies for Policy Makers to Deter Gift Card Frauds
In a recent report, the persistent nature of gift card scams has once again come to light, with no signs of a slowdown in occurrence. As consumers continue to lose millions to these fraudulent activities, policymakers in the United States are calling for increased action to protect consumers and address the international aspects of the issue.
The report suggests that merchants and gift card issuers should implement solutions based on the increased information available. However, it does not propose any new measures for gift card issuers to introduce stronger security features.
To combat these scams, policymakers can take several steps to strengthen consumer protections. One such measure is to enhance transparency and security requirements. This could involve implementing enhanced packaging and tamper-evident features on gift cards, as well as mandating clear, prominent warnings about potential fraud risks on both physical cards and online platforms.
Another proposed solution is mandatory consumer protection disclosures. Regulations could require issuers to disclose the risk of scams and limitations on liability upfront, helping manage expectations and ensuring better legal recourse for victims.
Policymakers could also harmonize and expand federal and state statutes governing gift card validity, expiration, and breakage revenue rules to protect consumers from unfair losses. Since state laws vary widely, federal baseline standards could help reduce confusion and protect buyers nationwide.
Enhanced enforcement and litigation support is another key area of focus. Support for mechanisms allowing consumers to pursue collective action and recover losses from large issuers or retailers could incentivize better industry practices.
Recognizing the international nature of gift card scams, U.S. policymakers should collaborate with international law enforcement and regulatory bodies to track down scammers and harmonize protective standards globally. This could involve sharing intelligence and standardizing consumer protection guidelines for gift cards sold in multiple countries.
Public education initiatives are also crucial in reducing victimization. Funding awareness campaigns to inform consumers about how to spot scams, verify gift card integrity before purchase, and report fraud effectively can significantly reduce the number of victims.
These combined strategies—improving packaging and disclosure rules, strengthening laws around gift card fraud, supporting enforcement avenues, cooperating internationally, and better educating consumers—would significantly enhance protections against gift card scams as a cross-border issue.
The Electronic Fund Transfer Act (EFTA) could be expanded to include stronger consumer protections for gift cards. However, the report does not discuss any new consumer protections for gift cards under the EFTA.
In the last three years, gift card scams have stolen nearly $450 million from Americans, with older consumers being particularly burdened by heavy losses and having little recourse. Scammers use predatory tactics, emotional stories, and product tampering in these scams.
The report on gift card scams is available for reading, and it discusses the need for more effective solutions to address this growing issue. A data-sharing pilot is proposed to increase information on scams and help merchants and gift card issuers implement solutions. However, the report does not provide specific details about the content of the data-sharing pilot.
As gift card scams continue to pose a significant threat to consumers, it is essential for policymakers to take action and implement the proposed strategies to protect consumers and reduce the impact of these scams.
- The report suggests that the Electronic Fund Transfer Act (EFTA) could be expanded to include stronger consumer protections for gift cards.
- Regulations could require gift card issuers to disclose the risk of scams and limitations on liability upfront, helping manage expectations and ensuring better legal recourse for victims.
- Public education initiatives, such as funding awareness campaigns, can significantly reduce the number of gift card scam victims by teaching consumers how to spot scams, verify card integrity, and report fraud effectively.
- Recognizing the international nature of gift card scams, U.S. policymakers should collaborate with international law enforcement and regulatory bodies to harmonize protective standards globally and track down scammers.
