Lawsuit claims Apple 'perpetuates' iTunes gift card scams

Posted:
in General Discussion edited July 2020
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.

iTunes Gift Card


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.

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Comments

  • Reply 1 of 39
    jungmarkjungmark Posts: 6,922member
    If someone wants payment in the form of gift cards, it’s obviously a scam. Don’t be stupid. 
    repressthisviclauyycuraharajony0jbdragonDAalsethelijahgwatto_cobra
  • Reply 2 of 39
    entropysentropys Posts: 3,509member
    Inconceivable!
    repressthisjbdragon
  • Reply 3 of 39
    rolyroly Posts: 73member
    I must’ve missed the point. If somebody sends me some goods and wants a gift card in return, what’s the problem? How is that a scam?
    eriamjh
  • Reply 4 of 39
    Rayz2016Rayz2016 Posts: 6,957member
    roly said:
    I must’ve missed the point. If somebody sends me some goods and wants a gift card in return, what’s the problem? How is that a scam?
    The scam is that you don’t receive the goods and services. 

    If you had paid with a credit card then the credit card company would reimburse you, and would be able to trace where the money went … which is why scammers demand gift cards. 

    It’s definitely a problem, but the reason this case is as fraudulent as the actual gift card scam is because Apple cannot trace the path of a gift card unless the victim knows the number of the token. In the history of mankind, no one has ever noted down the number of a gift token they’ve bought. I believe the shop you bought it from has a record of the number but that doesn’t help you. 

    Mmmm. 

    Thinking cap …

    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. 

    Now all Apple has to worry about is creating a system that’ll work for people without iPhones, and how to catch people who try to defraud the system by claiming they haven’t received the goods or service when, in fact, they have

    There ya go: by attempting to fix one problem, I’ve created ten other problems each of which is ten times worse.  I think I’ve just written my first EU technical directive. 


    edited July 2020 pscooter63viclauyycivanhjony0radarthekatelijahgAppleSince1976watto_cobrap-dog
  • Reply 5 of 39
    toganltoganl Posts: 3member

    gift
    noun
    1. 1. 
      a thing given willingly to someone without payment; a present.


    repressthiswatto_cobra
  • Reply 6 of 39
    What a stupid lawsuit. As dumb as the people who fall for the scam. I’ve seen an Apple store manager refuse to sell an older couple thousands in gift cards when it was reasonably clear they were being scammed. The couple begged to purchase the gift cards is spit of the logic. Rather sad. 
    jony0jbdragonRayz2016watto_cobra
  • Reply 7 of 39
    derek73derek73 Posts: 4member
    I can only imagine the number of frivolous lawsuits Apple and other high profile companies are involved in, especially in California it seems.

     The only people that win in these cases are the lawyers.
    jbdragonDAalsethwatto_cobra
  • Reply 8 of 39
    BeatsBeats Posts: 3,073member
    roly said:
    I must’ve missed the point. If somebody sends me some goods and wants a gift card in return, what’s the problem? How is that a scam?

    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.
    watto_cobra
  • Reply 9 of 39
    EsquireCatsEsquireCats Posts: 1,243member
    There’s quite a few problems with this case:
    - 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. 
    - Commerce is based on buyer beware principles, from 2nd hand Apple hardware that doesn’t boot to illegitimate gift cards. There is no reasonable expectation for Apple to track and police the 3rd party resale of their products. 
    - Asking for such accomodations open a reverse scam: where fraudulent sellers merely cancel the cards *after* the sale is made. After all, the seller would have the original receipt from Apple.
    - Finally, individual responsibility and accountability must come into fair balance with what is being requested of Apple. This is what is meant by “life isn’t fair”, if someone scams another, it’s because the victim for their own fault did not make adequate protections(whether through escrow, insurance or vigilance), there isn’t a “fairness fairy” to come and make it all right again.

    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. 
    jony0jbdragonDAalsethradarthekatwatto_cobrarandominternetpersonp-dog
  • Reply 10 of 39
    eriamjheriamjh Posts: 1,373member
    Suckers sue Apple because suckers are dumb.  But so are judges and juries.   
    repressthisjbdragonDAalsethwatto_cobra
  • Reply 11 of 39
    lkrupplkrupp Posts: 9,991member
    Just keep in mind that Apple's customers wind up paying for this crap. Think about that the next time you want to complain about Apple’s prices.
    watto_cobrap-dog
  • Reply 12 of 39
    wonkothesanewonkothesane Posts: 1,605member
    “Dear Apple, 

    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?”
    watto_cobra
  • Reply 13 of 39
    damn_its_hotdamn_its_hot Posts: 1,193member
    This is such a stupid ass lawsuit. The attorney that wrote it must be hoping for a nuisance settlement and what is the class “elders”? Is this jerk implying that only elders can be duped by such a scam?

    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.
    Rayz2016watto_cobra
  • Reply 14 of 39
    Soon, we will see refuse to do anything unless they have had legal advice first. Wanna go out for groceries? Talk to your lawyer first but only after filling in a 30 page risk assesment. The only winners will be the lawyers. They get rich on the backs of the rest of us.
    watto_cobra
  • Reply 15 of 39
    red oakred oak Posts: 942member
    Oh please

    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?
    jony0jbdragonwatto_cobra
  • Reply 16 of 39
    lkrupp said:
    Just keep in mind that Apple's customers wind up paying for this crap. Think about that the next time you want to complain about Apple’s prices.
    No they don’t. This is the same if the customer gets scammed out of cash, check, walmart gift card, Bitcoin. The customer is getting scammed which is horrible. Apple actually has many safeguards in place for the consumer here. 

    If you buy Apple Store gift cards in the store they can and will refuse the sale if it seems out of line (multiple gift cards of hundreds of dollars each). They even have very detailed information on their site about these scams. 


    People need to not blame Apple on this one. It’s the scammers who are at fault and the ones getting hurt are the ones that unfortunately fall for the deceit. 
    EsquireCatswatto_cobra
  • Reply 17 of 39
    lkrupplkrupp Posts: 9,991member
    lkrupp said:
    Just keep in mind that Apple's customers wind up paying for this crap. Think about that the next time you want to complain about Apple’s prices.
    No they don’t. This is the same if the customer gets scammed out of cash, check, walmart gift card, Bitcoin. The customer is getting scammed which is horrible. Apple actually has many safeguards in place for the consumer here. 

    If you buy Apple Store gift cards in the store they can and will refuse the sale if it seems out of line (multiple gift cards of hundreds of dollars each). They even have very detailed information on their site about these scams. 


    People need to not blame Apple on this one. It’s the scammers who are at fault and the ones getting hurt are the ones that unfortunately fall for the deceit. 
    You misunderstand my comment. I’m talking about the money Apple will spend defending itself against this lawsuit and the millions it will pay out should it lose the case. Apple customers WILL indeed pay for it in the price they pay for Apple products.
    jony0jbdragonwatto_cobrap-dog
  • Reply 18 of 39
    Heresy: Apple is not a religion. Tim Cook is not a god. Apple is not perfect.
  • Reply 19 of 39
    lkrupp said:
    lkrupp said:
    Just keep in mind that Apple's customers wind up paying for this crap. Think about that the next time you want to complain about Apple’s prices.
    No they don’t. This is the same if the customer gets scammed out of cash, check, walmart gift card, Bitcoin. The customer is getting scammed which is horrible. Apple actually has many safeguards in place for the consumer here. 

    If you buy Apple Store gift cards in the store they can and will refuse the sale if it seems out of line (multiple gift cards of hundreds of dollars each). They even have very detailed information on their site about these scams. 


    People need to not blame Apple on this one. It’s the scammers who are at fault and the ones getting hurt are the ones that unfortunately fall for the deceit. 
    You misunderstand my comment. I’m talking about the money Apple will spend defending itself against this lawsuit and the millions it will pay out should it lose the case. Apple customers WILL indeed pay for it in the price they pay for Apple products.
    Ah. Sorry about that. Insert my
    comment elsewhere where appropriate. Thanks for clarifying. 
    EsquireCatswatto_cobrap-dog
  • Reply 20 of 39
    jony0jony0 Posts: 366member
    A friend (no really) told me about this young single mother in his 4 apartment building in the country, on welfare but working under the table, was threatened by phone by the "Revenue Service" to hand over "unpaid taxes" or else they will have her child taken away unless she sends hundreds of dollars worth by way of Apple gift card numbers by phone. Clearly under duress, she bought all the cards in the local convenience store and gave the numbers when they phoned back. They said it wasn't enough and that she had to drive to the next town to get more. Fortunately (!?) she had the sense to stop it there, this was around Christmas to boot. A real sneeze job.
    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 !
    watto_cobrarandominternetperson
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