Dive Brief:
- Card company American Express has noticed increased efforts on the part of fraudsters to target elderly customers through gift card scams, CEO Steve Squeri said last week.
- “That’s one of the biggest fraud scams that are out there right now,” he said during a June 1 appearance at a Bernstein investor conference.
- “What you wind up seeing is people calling frantically and trying to buy gift cards, and we try and shut them down as much as we can,” Squeri said. “We’re putting a lot of time and effort into stopping that.”
Dive Insight:
Such scams often target older adults, tapping gift cards as an easy method of payment.
A fraudster will convince a person there’s some kind of financial emergency that needs addressing, such as an unpaid utility bill or a lottery prize that can be collected after paying some upfront fees. The person is told to load money onto a gift card and then read or send a photo of the number on the back of the gift card to the fraudster.
Scammers might threaten victims by saying their computer will be locked, for example, if they don’t follow through with the request, Squeri noted.
Another popular angle is to lure older victims through a romance ploy, said Troy Huth, a director with New York-based Auriemma Roundtables, which brings industry executives together to discuss corporate issues, including fraud.
“It’s amazing how many (elderly) are vulnerable to romance scams,” said Huth, who formerly was an executive seeking to combat fraud at the financial services company USAA. “They can string those relationships out a long time.”
About one-third of U.S. consumers said they or someone they know has been the target of a gift card scam, according to AARP data collected last year. Of that group, about one-quarter actually did buy the requested gift cards.
Older adults have always been a target, and that demographic has ballooned as baby boomers enter their sixties or seventies, said Jordan Hirschfield, director of the prepaid advisory group at Javelin Strategy & Research. “It becomes an even greater crime of opportunity because unfortunately there’s just more targets out there,” he said.
The anonymity of gift cards, and that they operate almost as cash equivalents, makes them a prime vehicle for these scams, Hirschfield said.
Gift cards enable fraudsters “to use those payment methods anywhere they can, and also to use that money quickly,” Hirschfield said. “That cash equivalency makes it so easy, but it’s also more powerful than cash because you don’t need to go anywhere to spend it.”
At some retailers, customers are no longer allowed to load more than $250 on gift cards because of these scams, Squeri said. New York lawmakers approved a bill last month that requires merchants selling gift cards to post signs warning customers of scam risks.
Such signs are popping up at stores elsewhere too, such as in Texas, according to Huth, who lives in Austin. In addition, he recounted how at one local grocery store, he was asked at the point of sale to acknowledge that he knows the person to whom he was planning to give the card.
“I know the retailers are aware of the activity and some are taking action,” Huth said. “I’ve been seeing more of that awareness messaging around stores lately.”
There’s education happening on the card issuer side, too, to make staff aware of the traits exhibited by people in the process of getting scammed, Hirschfield said. He didn’t elaborate.
Amex uses various methods to identify potentially fraudulent activity and potential scams, a spokesperson said, without providing any examples. “When our controls identify a possible instance of scam-type behavior, we reach out to the Card Member in an effort to disrupt the scam-based purchases,” the spokesperson said by email Friday.
Taking such action likely reduces costs for Amex and can lead to increased customer satisfaction, Hirschfield said.
“That’s a really welcome addition to employee training to say, we as the issuer are going to take some of that responsibility to educate our staff to identify things and maybe ask the right questions to hopefully prevent this,” Hirschfield said.
