Despite possessing unfettered oversight of its platforms, Apple has done little to stop an “epidemic” of iTunes gift card scams and reaps a hefty profit on purchases made with money bilked from victims, a proposed class action alleges.
The 47-page lawsuit says that while Apple has for years been aware of a scheme that cheats victims out of large sums of money via iTunes gift cards—and has the capability to pinpoint who might be responsible—the company is incentivized to allow the scam to continue given it reaps a 30-percent commission on purchases made using the gift cards.
“Apple dedicates a webpage to [the scam], but apparently does little more,” the lawsuit says, alleging Apple chooses to retain scam-derived commissions while falsely informing consumers that all of the money they lost is “irretrievable.”
Though the defendant claims that the funds on an iTunes gift card will likely be spent by scammers before a victim can contact the company or law enforcement, Apple chooses to retain the 30-percent commission for itself while waiting four to six weeks to remit the remaining—supposedly irretrievable—money to third-party app store and iTunes store vendors, the complaint says.
The plaintiffs, who range in age from 50 to 71 years old, say scammers have targeted senior citizens and other vulnerable groups, demanding iTunes gift card numbers over the phone as payment for taxes, hospital bills, utilities or debts. More recently, scammers have taken to “preying on the high levels of emotion” generated by the COVID-19 pandemic given seniors “may be more isolated than before,” the case states.
“Scammers prey on fears and sympathies by promising testing kits, vaccines, and cleaning services, and soliciting donations for charities or organizations impacted by the pandemic,” the complaint says. “Many such scammers are seeking payment in iTunes gift cards.”
Lawsuit: Two scams, same outcome for Apple
According to the lawsuit, scammers can make money off iTunes gift cards in one of two ways.
First, a scammer can use the stored value on an iTunes gift card to buy App and iTunes store content for apps they control, the case says. Through this method, a scammer in control of an app can receive payment from Apple, minus the company’s 30-percent commission, four to six weeks after spending the value of the wrongfully obtained iTunes gift card, according to the suit.
Notably, the lawsuit says Apple has in the past shut down apps that have engaged in this type of fraudulent conduct, which the plaintiffs say begs the question of what the defendant does with proceeds obtained through this type of scam.
Second, a scammer can obtain iTunes gift card numbers and then sell the numbers to third parties who then use them to buy App or iTunes store products. The suit states, however, that this type of grift “involves significant counter-party risk and steep discounts,” making it a less profitable way for scammers to monetize a stolen gift card.
No matter the method used by scammers, Apple keeps a 30-percent commission on scammed iTunes gift card proceeds, the complaint alleges.
Highlighted in the complaint is the allegation that Apple represents to the public that scammed iTunes gift card funds are lost forever—even with the level of control and visibility the company has over the App Store “ecosystem” and its ability to block apps used to facilitate illegal activity.
In truth, the lawsuit says, Apple has full control over the four key steps in the iTunes gift card spending chain, yet puts up little resistance on the way to pocketing its 30-percent commission:
Step One:The Point of Sale – According to the suit, Apple knows when and where – and even in what amount – a victim has bought an iTunes gift card. At the point of sale, the lawsuit says, a retailer must communicate with Apple in order to activate the gift card and record its stored value.
Step Two: The Apple ID Upload – Per the case, Apple knows the Apple ID onto which a gift card is added. In fact, an iTunes gift card must be uploaded to an Apple ID, which identifies the account through which customers interact with Apple and the iTunes store, before being used. Apple reserves the right to void the stored value of a gift card if it so much as suspects the iTunes store credit was obtained fraudulently, according to the complaint.
Step Three:Spending Stored Value on an App – The lawsuit says Apple also knows where an Apple ID holder spends the value of an iTunes gift card within the company’s App Store ecosystem given each purchase is traced back to the individual’s unique Apple ID. By this point, Apple knows the retail store where an iTunes gift card was bought, the Apple ID onto which the card’s value was uploaded, and the apps or iTunes products on which the money was spent.
Step Four: Payment of Money (Minus Apple’s Commission) – Lastly, the defendant knows the identity and financial account details of the App and iTunes store proprietors who receive money from gift card-made purchases given Apple sends them their cut of the sale in four to six weeks, the case says.
Also at Apple’s disposal is a tool called “reverse mapping.” According to the suit, a victim can call Apple and provide a scammed gift card number that the company can then use to determine which Apple ID and which App or iTunes Store products were involved in the conversion of the scammed gift card number into U.S. dollars, the complaint adds. Moreover, Apple has the capability to review Apple ID and App and iTunes Store transactional data to check on any other potentially suspect transactions, over which the company can suspend an offending Apple ID and app, the lawsuit says.
At the end of the day, however, Apple still keeps a piece of the iTunes gift card scam pie for itself, the complaint alleges.
“At minimum, Apple knows that it has kept 30% of the scammed gift card value,” the plaintiffs contest. “Rather than publicizing its omniscience in this Apple ‘ecosystem’ and its 30% take, Apple, as noted above, falsely tells victims that 100% of their money is irretrievable.”
Who’s covered by this lawsuit?
The lawsuit looks to cover a nationwide class of those in the U.S. who bought one or more iTunes gift cards, provided the redemption codes to people unknown to them who sought the codes under false pretenses, and were not refunded the value of the iTunes gift card(s) by Apple between January 1, 2015 and the present.
How do I sign up for the lawsuit?
You generally don’t have to do anything to “join” or be considered part of a class action lawsuit. After a case is initially filed, it usually takes time to work its way through the legal system, typically toward either a settlement or dismissal. The fact is, it may be a while before the time comes when those who might be a “class member” can submit claims for compensation.
At any rate, it’s only if and when a class action settles that a consumer would need to take action. For now, it’s best to sit tight and check back with this page for updates.
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