Walgreens Facing Class Action Lawsuit Over Alleged Gift Card Fraud

New to ClassAction.org? Read our Newswire Disclaimer

A proposed class action alleges Walgreen Co. has failed to ensure that its gift cards are reasonably protected against tampering by third parties. 

The plaintiff, a Biscayne Park, Florida consumer, alleges that after “misplac[ing]” three $150 Vanilla Visa gift cards he purchased at a North Miami Walgreens in November 2020, he found the cards in March 2022 and discovered that only one had retained its full balance. The consumer claims that, according to the cards’ transaction records, one was used at a Murrieta, California Target and, less than three hours later, a Target in Atlanta. The second card, the records showed, was used at a Long Beach, California Target, the suit says. 

The 17-page lawsuit alleges Walgreens has overall failed to take adequate and reasonable measures to ensure third parties are unable to tamper with its gift cards, including warning customers of the possibility that a card may be compromised and training employees to inspect cards for evidence of tampering. Per the case, the retailer continually receives customer complaints regarding gift cards whose balances have been reduced “through no fault of the purchasers” yet has continued to sell inadequately secured gift cards. 

“Every year, thousands of Walgreens customers who purchased gift cards at one of its many stores, are victimized by gift card fraud,” the complaint alleges. “The exact number of victims and extent of their losses may be only known by Walgreens, but during the past 10 years, the dollar amount is expected to be in the millions.” 

A central claim in the complaint is that Walgreens has failed to ensure that its third-party gift card manufacturers and point-of-sale terminals are able to measure a swiped card’s “jitter”—i.e. variations in the physical distance between transitions on the magnetic stripe of a gift card produced by the encoding of bits. According to the case, gift cards made in automated facilities exhibit more consistent bit lengths in comparison to cloned cards, which are typically created by hand and display greater variance in the placement of bits. 

Adequate “jitter” detection at a merchant’s point-of-sale terminals can “detect counterfeit cards with 99.9% accuracy,” the filing claims. 

According to the case, tamper-resistant “chip-and-pin” gift cards, which run code to perform authentication at the point-of-sale, are more expensive to produce than the stripe-based cards used by Walgreens. 

The suit further alleges Walgreens has failed to utilize, for instance, email instructions relaying to card purchasers how to activate a gift card. Moreover, Walgreens has failed to adequately train and require employees to carefully inspect gift cards prior to sale for evidence of tampering, which can include crooked security tape, scrape marks from tape removal, non-factory security tape and tape residue edge marks from the original security tape, the lawsuit expands. 

The lawsuit goes on to allege that Walgreens has failed and refuses to replenish the balance on gift cards bought by customers who have complained of apparent tampering. The suit claims the retailer has more broadly “failed to adequately vet the security practice of companies whose cards it sells.” 

“It is believed that Walgreens may receive financial benefits from each gift card sold, which makes them less willing to investigate and remedy the issues described here,” the suit posits. 

The lawsuit looks to represent consumers in Florida, Illinois, Arkansas, Iowa and Montana who bought gift cards at Walgreens within the applicable statute of limitations period. 

Get class action lawsuit news sent to your inbox – sign up for ClassAction.org’s free weekly newsletter here.