Apple moves to settle gift card scam lawsuit

AppleInsider

Apple has agreed to pay an as-yet undisclosed sum to settle a class-action lawsuit that claimed the company knowingly profited from scammers who stole its gift cards.

An Apple gift card

The original suit was filed in 2020 and alleged that Apple did not prevent scammers conning victims into sending them iTunes gift cards. Since Apple retails 30% of most items bought with a gift card, claimed the suit, it was profiting from the scam.

In 2021, US District Judge Edward Davila dismissed claims that Apple was perpetuating and benefiting from the scams, but did give the plaintiffs leave to amend their case and re-present it. Consequently, in 2022, a revised case was supported by Judge Davila.

Now according to Reuters, Apple has agreed to settle the suit. Court filings say that Apple and the plaintiffs have agreed on material settlement terms, following work with a mediator.

Neither Apple nor lawyers for the plaintiffs have commented. However, it's understood that the two sides are drafting a formal settlement that will be presented to Judge Davila.

The scam worked by victims being pressured into buying App Store, iTunes, or Apple Store gift cards. In each case the victims believed the payments were needed for urgent issues such as hospital bills, or debt collection, and sufficiently few questioned why payment was to be made in gift cards, that it proved to be profitable for scammers.

Victims bought the gift cards, and were then pressured to tell the scammers the codes on the back of the cards. This worked often enough, despite those cards all having a warning that said "Do not share your code with anyone you do not know."
Reuters says that according to the complaint, Apple would deposite 70% of stolen funds into the scammers' bank accounts, keeping 30% for itself. Overall, victims may have lost "hundreds of millions of dollars" because of the scam.

In the June 2022 revised ruling that allowed the case to continue, Judge Davila agreed with plaintiffs that Apple's attempts to disclaim liability were unconscionable.

Separately, a similar case was filed in 2020 alleging that Apple failed to "implement and maintain reasonable security procedures and practices to properly secure" its gift cards.



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laytech

Seriously, are some people stupid? Some people reap what they sow. 

mark fearing

how Apple is somehow guilty of this is nuts. store employees always warned people who who doing weird, large gift card buys. this is openly ridiculous. was this a Texas judge?

gatorguy

mark fearing said:

how Apple is somehow guilty of this is nuts. store employees always warned people who who doing weird, large gift card buys. this is openly ridiculous. was this a Texas judge?

Apple didn't lose. They offered to settle and avoid a ruling that might go against them.  

davidw

>Reuters says that according to the complaint, Apple would deposite 70% of stolen funds into the scammers' bank accounts, keeping 30% for itself.<

So is this saying that if a person was given an $25 iTunes gift card, that person can "cash out" that gift card for 70% of its face value? Where Apple will deposit $17.50 into the gift card holder bank account and will keep $7.50 for itself? Is that standard practice with any other gift cards? In other words, if i was given a $50 gift card for Target but don't need anything from Target, I can cash out that gift card to get $35 to spend else where (while Target keeps $15)?  Like it seems I can do with any Apple gift card. 

If this is the case, then I can think of several easy ways Apple can stop or at least slow down scammers. For one, limit the amount of gift cards that can be cashed out per account. Or place a time limit on how many cashed out gift cards can be deposited per account. (I would think 5 per year would be more than enough for the average consumers.) Or deposit funds only after a holding period of a week or so. Or require the return of the actual gift card, before any funds is deposited. And the return can be done at any retail Apple Store. And finally, if this is not standard practice, then just stop it. Who's going to be complaining, besides the scammers? 

danox

Apple should just cancel Apple gift cards, sometimes people thru bad behavior can't have good things.

gatorguy

davidw said:

>Reuters says that according to the complaint, Apple would deposite 70% of stolen funds into the scammers' bank accounts, keeping 30% for itself.<

So is this saying that if a person was given an $25 iTunes gift card, that person can "cash out" that gift card for 70% of its face value? Where Apple will deposit $17.50 into the gift card holder bank account and will keep $7.50 for itself? Is that standard practice with any other gift cards? In other words, if i was given a $50 gift card for Target but don't need anything from Target, I can cash out that gift card to get $35 to spend else where (while Target keeps $15)?  Like it seems I can do with any Apple gift card. 

If this is the case, then I can think of several easy ways Apple can stop or at least slow down scammers. For one, limit the amount of gift cards that can be cashed out per account. Or place a time limit on how many cashed out gift cards can be deposited per account. (I would think 5 per year would be more than enough for the average consumers.) Or deposit funds only after a holding period of a week or so. Or require the return of the actual gift card, before any funds is deposited. And the return can be done at any retail Apple Store. And finally, if this is not standard practice, then just stop it. Who's going to be complaining, besides the scammers? 

IMO, Apple has ample time to act on a scam report. They hold 100% of the funds for 4 to 6 weeks, only then sending the scammer their 70% and keeping 30% for themselves.

stompy

davidw said:

>Reuters says that according to the complaint, Apple would deposite 70% of stolen funds into the scammers' bank accounts, keeping 30% for itself.<

So is this saying that if a person was given an $25 iTunes gift card, that person can "cash out" that gift card for 70% of its face value? 

There's better explanation elsewhere on the web. "the scammers used the gift card to buy Apple products. For iTunes gift cards, the scammers bought their own apps available on the App Store to receive the money in their bank account." The 70/30 in this article is simply what apple pays every app developer / keeps for app purchases.

From that same article "Judge Davila rejected Apple’s appeal to dismiss the lawsuit on the grounds that the company could do more to help the victims even after they had been scammed." 

I don't know if that's an accurate summary of the judgement, but that seems unusual to state it that way.

I'd think Apple will now have to do "more" to avoid similar lawsuits in the future.

Identify every app being used to launder gift cards ?

gatorguy

stompy said:

davidw said:

>Reuters says that according to the complaint, Apple would deposite 70% of stolen funds into the scammers' bank accounts, keeping 30% for itself.<

So is this saying that if a person was given an $25 iTunes gift card, that person can "cash out" that gift card for 70% of its face value? 

There's better explanation elsewhere on the web. "the scammers used the gift card to buy Apple products. For iTunes gift cards, the scammers bought their own apps available on the App Store to receive the money in their bank account." The 70/30 in this article is simply what apple pays every app developer / keeps for app purchases.

From that same article "Judge Davila rejected Apple’s appeal to dismiss the lawsuit on the grounds that the company could do more to help the victims even after they had been scammed." 

I don't know if that's an accurate summary of the judgement, but that seems unusual to state it that way.

I'd think Apple will now have to do "more" to avoid similar lawsuits in the future.

Identify every app being used to launder gift cards ?

I don't know if it was in the article you read or a different one, but it was also reported that Apple doesn't immediately give those developers their 70% cut, holding the funds for several weeks. During that time, couldn't Apple step in and cancel the transaction once acceptable evidence of a scam was offered to them? I think that could be one reason why Judge Davila wasn't happy with Apple's response of "it's policy". 

Marvin

danox said:

Apple should just cancel Apple gift cards, sometimes people thru bad behavior can't have good things.

If they blocked international gift card redemption, that would fix most of the issue. Scammers could use a VPN to bypass region locks but they can check the size of the transaction, if it's a new account and if it's using a VPN.

https://www.wmtv15news.com/2022/06/13/madison-woman-loses-11500-gift-card-scam/

A lot of the time it's foreign countries scamming people. This Youtube channel shows how they do it (10:30):



Gift cards over $200 in a certain timeframe should be flagged for extra verification.

davidw

gatorguy said:

stompy said:

davidw said:

>Reuters says that according to the complaint, Apple would deposite 70% of stolen funds into the scammers' bank accounts, keeping 30% for itself.<

So is this saying that if a person was given an $25 iTunes gift card, that person can "cash out" that gift card for 70% of its face value? 

There's better explanation elsewhere on the web. "the scammers used the gift card to buy Apple products. For iTunes gift cards, the scammers bought their own apps available on the App Store to receive the money in their bank account." The 70/30 in this article is simply what apple pays every app developer / keeps for app purchases.

From that same article "Judge Davila rejected Apple’s appeal to dismiss the lawsuit on the grounds that the company could do more to help the victims even after they had been scammed." 

I don't know if that's an accurate summary of the judgement, but that seems unusual to state it that way.

I'd think Apple will now have to do "more" to avoid similar lawsuits in the future.

Identify every app being used to launder gift cards ?

I don't know if it was in the article you read or a different one, but it was also reported that Apple doesn't immediately give those developers their 70% cut, holding the funds for several weeks. During that time, couldn't Apple step in and cancel the transaction once acceptable evidence of a scam was offered to them? I think that could be one reason why Judge Davila wasn't happy with Apple's response of "it's policy". 

From here ....

https://www.revenuecat.com/blog/growth/understanding-app-store-payments-and-revenue-reporting/

The funds (payment for apps) are not "held", rather it's the way developers are paid for the sale of their apps. Apple pays the developers 30 days after the end of each fiscal month. So purchases made in the beginning of the month won't be paid to the developers until 60 days later. While purchases made at the end of the month will be paid in 30 days. Google does the same, only they pay developers on the 15th of each calendar month, for the sales made in the previous month. So with Google, the waiting period to be paid for a purchase could be from 15 days to 45 days.

But it's not at the purchase of the apps that is where the gift card is redeemed. The gift card has to be redeemed into an Apple ID account (formally iTunes account)  and then  that account is used to pay for the apps. So the holding period has to occur when the gift cards are entered into an Apple ID account. Which would be unfair for the honest account holders that wants to (or need to) use the money from a gift card, immediately.

I think the main problem with these scams is that a lot of them, (maybe most) goes unreported. The person that got scammed either was too embarrass to admit they fell for the scam or figure it's too late to do anything about it after they realized they got scammed. And most of these gift card scams seems to be for just a couple of hundred dollars, so not a major loss (for most). Though every so often scams that netted over $2000 in gift cards from the grand parents that received a call claiming to be from the police, telling them that their grand kid is in jail and needs to be bailed out or from the IRS, do make the news, but the majority of them amount to just a couple of hundred dollars to pay a fine. The 1000's of dollars scams usually involve a CC or the wiring (transferring) of money from a bank account. Buying over $2000 worth of gift cards might raise suspicion at the retail stores, unless purchased online. But people that know how to purchase gift cards online, are more likely to recognize a scam.

The scam that just made the news again in my area (last week), was a warning about scam calls claiming to be from the county clerk office and are told they missed showing up for jury duty and had to pay a $250 fine (in gift cards) or there will be a warrant for their arrest. The scammers know that it's easier to get away with 10 $250 scams than one $2500 scam. As the $250 scams are more likely to go unreported. There's not much Apple can do about the scams that are not reported. I'm sure the scammers are opening up new Apple ID accounts all the time, just to redeem newly scammed gift cards. And stop adding to other accounts, until they are sure Apple have not flagged the account for redeeming scammed gift cards.

 

gatorguy

davidw said:

gatorguy said:

stompy said:

davidw said:

>Reuters says that according to the complaint, Apple would deposite 70% of stolen funds into the scammers' bank accounts, keeping 30% for itself.<

So is this saying that if a person was given an $25 iTunes gift card, that person can "cash out" that gift card for 70% of its face value? 

There's better explanation elsewhere on the web. "the scammers used the gift card to buy Apple products. For iTunes gift cards, the scammers bought their own apps available on the App Store to receive the money in their bank account." The 70/30 in this article is simply what apple pays every app developer / keeps for app purchases.

From that same article "Judge Davila rejected Apple’s appeal to dismiss the lawsuit on the grounds that the company could do more to help the victims even after they had been scammed." 

I don't know if that's an accurate summary of the judgement, but that seems unusual to state it that way.

I'd think Apple will now have to do "more" to avoid similar lawsuits in the future.

Identify every app being used to launder gift cards ?

I don't know if it was in the article you read or a different one, but it was also reported that Apple doesn't immediately give those developers their 70% cut, holding the funds for several weeks. During that time, couldn't Apple step in and cancel the transaction once acceptable evidence of a scam was offered to them? I think that could be one reason why Judge Davila wasn't happy with Apple's response of "it's policy". 

From here ....

https://www.revenuecat.com/blog/growth/understanding-app-store-payments-and-revenue-reporting/

The funds (payment for apps) are not "held", rather it's the way developers are paid for the sale of their apps. Apple pays the developers 30 days after the end of each fiscal month. So purchases made in the beginning of the month won't be paid to the developers until 60 days later. While purchases made at the end of the month will be paid in 30 days. 

 

In my vocabulary that qualifies as held.

entropys

What could Apple do about it? The original owner of the gift card would not know what the card number was to tell Apple (or the police: joke).