Lawsuit claims Apple 'perpetuates' iTunes gift card scams
A class-action complaint lodged on Friday claims Apple not only enables iTunes gift card scams, which have become increasingly widespread over the past few years, but also profits from the activity.
Filed with the U.S. District Court for the Northern District of California, the suit alleges Apple is at fault for allowing iTunes gift card scams to continue despite their relatively straightforward and predictable nature.
Further, Apple's control of the App Store, iTunes and backend payments processing system supposedly affords transparency into, and veto power over, fraudulent transactions. The company is able to end scam transactions at multiple points in the process, but fails to act in the interest of its customers, the complaint argues.
In support documents, Apple notes scams typically follow a "formula" in which an attacker persuades a victim -- sometimes under duress -- to send them money in the form of an iTunes gift card. With a card number in hand, scammers can redeem the funds by making in-app purchases in apps they control. Alternatively, scammers can resell the card number on the black or gray markets.
Scammers net a diminished take of the gift card's value in the above scenarios, but Apple comes out ahead with its customary 30% share of App Store purchases. This money is not returned to victims, the lawsuit notes.
As purveyor of iTunes gift cards and the App Store, Apple has unique insight into fraudulent dealings and can monitor, halt and reverse such processes with minimal effort, according to plaintiffs.
As noted in the complaint, Apple knows where gift cards are purchased, the Apple IDs to which card values are applied and where the funds are spent. The company also holds iTunes gift card payments for approximately 45 days before transferring the money to third-party app makers, a window that could be used to investigate complaints and reverse fraudulent transactions.
The case further claims Apple misrepresents its ability to deal with iTunes gift card scams. The company in its support documentation says, "Once [card] numbers are provided to the scammers, the funds on the card will likely be spent before you are able to contact Apple or law enforcement." Terms and conditions outlined by the company attempt to limit its liability when cards are lost or stolen. Today's suit in part challenges those claims.
"Even if that limitation of liability applied by its terms - which it arguably does not - Apple cannot disclaim liability for loss or damage resulting from scams which it intentionally aids, abets, and perpetuates," the filing reads. "Any attempt by Apple to disclaim liability for loss or damage resulting from iTunes gift card scams would be unconscionable and unenforceable in light of its role in those scams and the profit that it makes and retains from such scams."
Losses from victims who reported iTunes gift card scams to the U.S. Federal Trade Commission exceeded an estimated $93.5 million between 2015 and 2019. While exact numbers are unknown, the suit asserts only a small percentage of affected consumers report incidents to the FTC. If the true value of collective scam operations hit $1 billion, for example, Apple would have retained some $300 million in commissions.
Plaintiffs claim violation of the California Consumers Legal Remedies Act, violation of the California Unfair Competition Law, violation of the California False Advertising Law, breach of contract, unjust enrichment, breach of the implied covenant of good faith and fair dealing, aiding and abetting intentional torts, violation of the California Elder Abuse Law, violation of the Elder Abuse Laws of Other States, and violation of the Oregon Elder Persons and Persons with Disability Abuse Prevention Act. They seek class certification, damages and court fees.
Filed with the U.S. District Court for the Northern District of California, the suit alleges Apple is at fault for allowing iTunes gift card scams to continue despite their relatively straightforward and predictable nature.
Further, Apple's control of the App Store, iTunes and backend payments processing system supposedly affords transparency into, and veto power over, fraudulent transactions. The company is able to end scam transactions at multiple points in the process, but fails to act in the interest of its customers, the complaint argues.
In support documents, Apple notes scams typically follow a "formula" in which an attacker persuades a victim -- sometimes under duress -- to send them money in the form of an iTunes gift card. With a card number in hand, scammers can redeem the funds by making in-app purchases in apps they control. Alternatively, scammers can resell the card number on the black or gray markets.
Scammers net a diminished take of the gift card's value in the above scenarios, but Apple comes out ahead with its customary 30% share of App Store purchases. This money is not returned to victims, the lawsuit notes.
As purveyor of iTunes gift cards and the App Store, Apple has unique insight into fraudulent dealings and can monitor, halt and reverse such processes with minimal effort, according to plaintiffs.
As noted in the complaint, Apple knows where gift cards are purchased, the Apple IDs to which card values are applied and where the funds are spent. The company also holds iTunes gift card payments for approximately 45 days before transferring the money to third-party app makers, a window that could be used to investigate complaints and reverse fraudulent transactions.
The case further claims Apple misrepresents its ability to deal with iTunes gift card scams. The company in its support documentation says, "Once [card] numbers are provided to the scammers, the funds on the card will likely be spent before you are able to contact Apple or law enforcement." Terms and conditions outlined by the company attempt to limit its liability when cards are lost or stolen. Today's suit in part challenges those claims.
"Even if that limitation of liability applied by its terms - which it arguably does not - Apple cannot disclaim liability for loss or damage resulting from scams which it intentionally aids, abets, and perpetuates," the filing reads. "Any attempt by Apple to disclaim liability for loss or damage resulting from iTunes gift card scams would be unconscionable and unenforceable in light of its role in those scams and the profit that it makes and retains from such scams."
Losses from victims who reported iTunes gift card scams to the U.S. Federal Trade Commission exceeded an estimated $93.5 million between 2015 and 2019. While exact numbers are unknown, the suit asserts only a small percentage of affected consumers report incidents to the FTC. If the true value of collective scam operations hit $1 billion, for example, Apple would have retained some $300 million in commissions.
Plaintiffs claim violation of the California Consumers Legal Remedies Act, violation of the California Unfair Competition Law, violation of the California False Advertising Law, breach of contract, unjust enrichment, breach of the implied covenant of good faith and fair dealing, aiding and abetting intentional torts, violation of the California Elder Abuse Law, violation of the Elder Abuse Laws of Other States, and violation of the Oregon Elder Persons and Persons with Disability Abuse Prevention Act. They seek class certification, damages and court fees.
iTunes Gift Card Scam Lawsuit by Mikey Campbell on Scribd
Comments
Okay, how about this: customer-activated gift tokens. Before you can pass the token on, you have to scan it with your phone to activate it. Now, if you’re dumb enough to get scammed liked this, you’ll be able to ID the token you passed on to the scammer.
The only people that win in these cases are the lawyers.
What are the goods? Could be stolen or a bank scam. No stranger is gonna shower you with gifts.. then ask for a gift card in return.
- the fault isn’t with Apple, but the concept of payment with gift cards. (Apple is irrelevant as the scam can use any gift card, a bounced cheque, empty prepay Visa card or anything that falsely holds value.)
- the second is the transference of police or legal powers to Apple. Apple aren’t the government. Fraud must be reported to the police, and from there action taken. Apple can’t oversee or validate the transactions of consenting 3rd parties.
While on the topic of buyer beware: don’t buy massively discounted itunes gift store cards from ebay.
and just as a cherry on top: Apple don’t get “30%”, gift store cards are sold at discount through retail and those cards aren’t free to produce/ship.
please help me, because I’m stupid. First, I need my money back since I felt paying with a gift (!) card is like money, or trading donkeys, or so. Now I need the cash to pay my lawyer who is great because off every dollar he gets from you I will get al ist one cent. Thanks Tim Apple, err, you know just help. Pretty please?”
Count this elder as one not in his class!
P.S. I am guessing this atty just graduated & passed the bar & wanted to impress his folx with his first case being a class action! The newest Jr partner at Dewey, Cheatum and Howe.
Anyone stupid enough to give a gift card to someone they have not vetted is stupid and deserves it
What ever happened to personal responsibility? How is this Apple fault?
comment elsewhere where appropriate. Thanks for clarifying.
So the targets aren't always Apple customers and for all we know neither are the scammers, she was not AFAIK and might not even have known much about the company or gift cards and she surely bought them with cash. This is a sad example of a sad situation that makes it hard if not impossible to trace, particularly if the scammers spread out the time and locations of redeeming the card numbers for different purposes or even spread out the resale.
Apple may have noted that scams typically follow a "formula" for an attack, before Apple's involvement, but there is no formula for redeeming cards, except for the dumbest of scammers. IANAL but this case might have a gallant cause of the meek versus the evil corporation but my verdict would be : puuuhhhlease !