Maryland is the first state in the country to create a law aimed at curbing a rising form of gift card fraud called card draining. Card draining is a scheme in which thieves remove gift cards from stores, capture their numeric codes or swap them out for counterfeit cards, and place the products back on display, Propublica reports. When an unsuspecting customer loads money onto a tampered or counterfeit card, criminals access it online and steal the balance. Gov. Wes Moore recently signed the Gift Card Scams Prevention Act of 2024, which marks a milestone in the growing government effort to combat card draining, which escalated dramatically during the pandemic thanks to the ingenuity of Chinese organized crime rings. ProPublica recently reported that late last year, after a spate of consumer complaints and arrests, the Department of Homeland Security launched a task force to address card draining. “We’re talking hundreds of millions of dollars, potentially billions of dollars, [and] that’s a substantial risk to our economy and to people’s confidence in their retail environment,” Adam Parks, a Homeland Security assistant special agent in charge, told ProPublica.
The Maryland law is the first in the nation to mandate secure packaging for most gift cards sold in person. Among other measures, the bill required open- and closed-loop cards purchased in person to be sold in secure packaging that conceals their codes and shows signs of tampering when opened. Citing a rise in consumer complaints and lawsuits, Kramer told ProPublica that the legislation was needed to protect consumers. “This has been going on for several years now, and the industry was not addressing it,” Kramer said. An estimated $570 billion is loaded onto gift and prepaid cards each year in the United States, Hirschfield said. While it’s difficult to know how much of that money has been stolen, even a 1% fraud rate would result in $5.7 billion in annual consumer losses.
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