What to know about gift card draining scams in Texas and how to protect yourself

Two people were arrested in Plano this month in a gift card draining scam targeting multiple stores in North Texas.

Police seized roughly 4,100 tampered gift cards for Apple, Sephora, Amazon and Footlocker, totaling nearly $650,000 in potential losses. Authorities said additional arrests are coming, and the scam extends beyond Texas.

Plano’s forgery unit worked with the U.S. Secret Service and U.S. Immigration and Customs Enforcement to investigate and surveil stores around Dallas-Fort Worth, including H-E-B, Walmart, Tom Thumb-Albertsons, Walgreens and CVS.

Police spokeswoman Jennifer Chapman said officers observed two people placing such gift cards onto store shelves in multiple cities. Two California residents, a 42-year-old woman and 33-year-old man, were arrested for unlawful use of a criminal instrument.

What is card draining?

Card draining is when someone removes gift cards from a store display, opens them and records the card numbers and PINs. The scammers then repair the packaging and return the cards to a store display. When a customer selects and loads money onto the card, the scammer is able to access the card online and steal the balance.

Federal authorities have warned of a rise in scams related to gift cards, which have few protections for consumers and can yield a potential windfall for criminals. Last holiday season, Americans spent nearly $30 billion on gift cards.

ProPublica reported this month that federal authorities are investigating the involvement of Chinese organized crime rings in gift card fraud schemes that have swiped hundreds of millions of dollars from American consumers.

The U.S. Department of Homeland Security launched a task force to combat the scams in response to a flurry of consumer complaints and arrests connected to card draining, according to the nonprofit news organization. It is not yet clear if the Plano arrests are connected to the organized crime rings.

States are trying to fight gift card scams with consumer alerts, warning signs on store displays and specialized packaging, according to a report by Stateline, which covers trends in state policy. Retailers and card manufacturers have pushed back, saying micromanaging is not necessary and could hurt small businesses.

How to protect yourself?

Plano police offered tips for customers who purchase gift cards:

• Consumers should inspect gift cards prior to purchase and notify staff if anything appears out of the ordinary.
• Keep a receipt as proof of purchase.
• If you become a victim of card draining, contact the retailer and explain the missing funds.
• If it’s a prepaid card, look at the back and contact the funds provider — such as InComm Payments, Green Dot or Blackhawk — to report the stolen funds and attempt to recover a remaining balance.
• File a report with the law enforcement agency where the card was purchased, as well as with the Federal Trade Commission.