May 25, 2023
New York Secretary of State Robert J. Rodriguez today reminded businesses of a new law to protect consumers from potential gift card scams. Effective June 20, 2023, all businesses selling gift cards must display a notice at or near where any gift card or gift certificate is displayed or sold to caution consumers about gift card fraud. Requesting gift cards as payment has become increasingly popular with scammers as funds are nearly impossible to trace. According to the Federal Trade Commission in 2022, nearly 65,000 consumers filed a complaint related to gift card scams, equating to a total loss of $228.3 million.
“With the number of gift card scams on the rise, it’s more important than ever to educate consumers so they know that gift cards should only be used for gifts, not to make payments,” said New York Secretary of State Robert J. Rodriguez. “This new law requiring warning signage where gift cards are displayed or sold will help to reduce the success rate of these scammers and protect consumers’ hard-earned money.”
Senator Kevin Thomas said, “The increase in scammers using gift cards as a mechanism to defraud consumers has grown, which is why I introduced legislation earlier this year to require businesses to display in-store warnings about potential gift card scams. I am happy to see the Department of State taking steps to implement these guidelines to protect New Yorkers from becoming potential victims of financial fraud.”
Assemblywoman Amy Paulin said, “Gift cards are an increasingly prevalent way for con artists to steal from people. As soon as someone tells you to pay them with a gift card, you should immediately suspect that it’s a scam. Education at the point of purchase is an effective way of warning people about how gift cards are used by scammers, which led me to author this bill. I commend Governor Hochul for taking this step to help protect New Yorkers from gift card scams.”
Claire Rosenzweig, President and CEO of Metro New York's Better Business Bureau®, said, “Over the years, we have observed many kinds of fraud where payment by gift card is demanded by the scammers and have even published an investigative study report about this problem. We are gratified to see that New York will now require warning notices to be placed at the point-of-purchase for gift cards; consumers need to be reminded about the potential dangers.”
To address the growing prevalence of gift card fraud, this new law requires retailers and businesses to clearly post a notice at or near the gift card display or point-of-purchase to help increase public awareness of this scam and provide guidance to vulnerable customers if they believe they are being scammed. Gift card sellers are required to display these notices in an area that is visible to consumers and close to where the gift cards are displayed or the sale occurs.
The Department of State’s Division of Consumer Protection has created and published model notices that gift card sellers can download and post to comply with this new law. Businesses are encouraged to access these downloadable signs and post them where they sell gift cards. These downloadable signs are available in three different sizes on the Division of Consumer Protection website.
Businesses may also create their own notice that includes the following guidance:
- Cautions the purchaser about pre-paid card scams.
- Instructs the purchaser on what to do if they suspect they might be a potential victim of such a scam.
Gift card scams can take many forms, but are often phone calls targeting consumers, particularly the elderly and immigrants, stating that they owe money and payment is required by gift card. Below are examples of different forms of gift card scams:
- A consumer received an email that appeared to be from eBay stating that the consumer needed to call to verify his account. The consumer called and was told that in order to complete the verification, he needed to purchase an eBay gift card and provide the code. The consumer recognized it was a scam and ended the call.
- A consumer purchased a puppy from a breeder advertising on Facebook Marketplace. The puppy was $2,000 + fees, but the breeder stated they didn’t take credit cards, so they instructed the consumer to purchase Visa gift cards and provide the numbers and PINs. The consumer purchased a total of $3,700 in gift cards to pay for the cost of the puppy, shipping, crate and insurance. The breeder then disappeared, and the consumer now realizes they were scammed out of $3,700.
- A consumer received a Facebook message from a friend stating they were stranded with flat tire and they needed money for the tow truck and a new tire. The “friend” asked if the consumer could purchase a $500 gift card for them and they would pay the consumer back. The consumer purchased the gift card and provided the number and pin, but then later found out the friend’s Facebook account had been hacked and the request for the $500 was a scam.
- A senior citizen received an email that appeared to be from his bank to authorize a large cash transfer to an account overseas. The man knew nothing of the transfer, and when he called the phone number in the email, he was told that the only way to stop the transfer was to overdraft his account so there would be no money to transfer out. The man was told to purchase $7,200 in gift cards and the bank would process them immediately to justify the overdraft. He purchased the gift cards and provided the account and pin numbers as instructed. The victim’s wife believed it was a scam and encouraged him to go into a bank branch to verify the information. He then learned it was a scam but, by that point, had already lost $7,200.
For more guidance to inform and empower New York consumers purchasing gift cards and gift certificates, please review the Division of Consumer Protection December 2022 consumer alert, which clearly outlines gift card fee prohibitions and expiration date limitations. Businesses and consumers are encouraged to learn more about available resources on the Division of Consumer Protection’s website.
About the New York State Division of Consumer Protection
The New York State Division of Consumer Protection provides resources and education materials to consumers on product safety, as well as voluntary mediation services between consumers and businesses. The Consumer Assistance Helpline 1-800-697-1220 is available Monday to Friday from 8:30am to 4:30pm, excluding State Holidays, and consumer complaints can be filed at any time at www.dos.ny.gov/consumer-protection.
For more consumer protection tips, follow the Division on social media at Twitter: @NYSConsumer and Facebook: www.facebook.com/nysconsumer.