‘Ongoing Fraud’: Class Action Claims Apple Gift Card Funds Susceptible to Theft [UPDATE]

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A proposed class action alleges Apple has knowingly sold “defective, unsecure and valueless” gift cards susceptible to an ongoing scam whereby funds are fraudulently redeemed by third parties before they can be accessed by the card’s owner.

According to the lawsuit, Apple, rather than implement simple preventative measures to curb gift card theft, has instead chosen to stay silent, declining to refund victims or roll out stronger security procedures to protect consumers’ personal information.

The plaintiff in the case, which names as defendants Apple, Inc. and Apple Value Services, LLC, says she purchased a $50 Apple gift card from an Encinitas, California Walmart as a gift for her son. Though the gift card remained in the plaintiff’s possession until she presented it to her son, he received a message upon attempting to redeem the card indicating the funds had already been redeemed by another party, the amended suit claims.

When the plaintiff contacted Apple about the gift card, she was told that the funds had been redeemed by another account on April 3, 2020, the same day she purchased the card, and that the gift card no longer had any value, the complaint says. For security reasons, the suit states, Apple would not provide any information about the account that fraudulently redeemed the gift card. The plaintiff says she was then told “there was nothing else” Apple could do for her, that her case was closed, and that any further contact regarding the matter would go unanswered.

According to the case, Apple’s defective design, manufacture and/or packaging of its gift cards has allowed them to be targeted by thieves who electronically access the cards at the point of sale and redeem the funds loaded thereon. Thus, when a consumer attempts to use a newly activated gift card, the card registers as already “redeemed” and is valueless, the suit alleges.

The lawsuit explains that Apple gift cards, which can be purchased online or through various retailers, may be used to pay for goods available through Apple’s online services, including the App Store and iTunes. Each gift card contains a unique personal identification number (PIN) that is activated when the card is purchased, the case says, adding that each PIN, which is covered by silver scratch-off tape, contains personal information associated with the gift card purchaser.

The lawsuit goes on to assert that Apple maintains records of when, how, and where its gift cards are activated and redeemed and is therefore aware that its gift cards are easily subject to fraud. Further, numerous consumer complaints have put the defendants on notice that the funds loaded onto gift cards are not secure, the case adds.

Despite this knowledge, Apple has nevertheless failed to take reasonable steps to safeguard consumers’ accounts and ensure third parties cannot tamper with their gift cards, the complaint claims. Moreover, the defendants have failed to disclose to consumers that the cards were subject to “ongoing fraud” whereby funds could be easily accessed by third parties, as well as the fact that it’s Apple’s policy to not refund or replace the value of the gift cards subject to fraud, the suit alleges.

“Had Apple disclosed to Plaintiff and Class Members that Apple did not have adequate systems, policies, and security measures in place to secure customers’ Apple gift card account information and Apple gift card funds, Plaintiff and Class Members would not have purchased the Apple gift cards,” the complaint contests, charging that the defendants have “reaped enormous profits” from their allegedly deceptive scheme.

Apple currently faces another proposed class action filed over allegations that the tech giant has knowingly profited from gift card scams while doing little to protect or reimburse victims.

Among other apparent violations of California law, the case alleges Apple violated the state’s newly minted Consumer Privacy Act by failing to protect proposed class members’ personal information associated with the stolen PINs.

Initially filed in San Diego County Superior Court, the lawsuit has been removed to the state’s Southern District.

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