Maker of popular gift cards sued over alleged ‘card draining’ scam risk

nComm Financial Services, a Georgia-based company that makes many of the popular gift cards sold in stores and its partner banks are facing a lawsuit filed by San Francisco City Attorney David Chiu alleging some of their cards aren’t as secure as they can be.

A Georgia-based company that makes many popular gift cards faces a lawsuit in California alleging it failed to take precautions to prevent scammers from draining gift cards of their value – a scam that experts say is common. The lawsuit, filed by San Francisco City Attorney David Chiu, draws attention to InComm Financial Services’ proprietary nonreloadable gift cards, “Vanilla Gift” and “One Vanilla,” which it says are sold around the country and accepted wherever debit cards are allowed. Scammers are using different methods to drain money from gift cards before they can be used for their intended purchase, according to Chiu. The lawsuit alleges InComm and its partners have “known for years that its nonreloadable Vanilla debit card’s lax security features (have led) to numerous card-draining incidents,” but have “not sufficiently improved the cards’ packaging or implemented other changes to prevent those losses. Gift card buyers and users need to be especially vigilant about this type of scam, said Christopher Peltz, cyber security expert with Guidepoint Security. “So far, card draining is the most prevalent scam this holiday season,” he said. The lawsuit details how the packaging of the Vanilla cards allegedly makes it easier for criminals to duplicate or tamper with what should be secure numbers and bar codes on the cards. “InComm’s negligence has opened the door for scammers to defraud thousands of consumers,” said Chiu.