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Visa being sued over ‘Vanilla’ gift card scam

Emily Brown

Published 
| Last updated 

Visa being sued over ‘Vanilla’ gift card scam

Featured Image Credit: Matt Cardy/Getty Images / Tiktok/@mssweetthang81

Visa has been sued over the security of its prepaid 'Vanilla' gift cards after they were targeted by thieves.

The card company was hit with a lawsuit filed in White Plains, New York on Tuesday (30 January), as consumers accused Visa of failing to make the prepaid cards less likely to be drained by thieves.

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The proposed class action is being led by employer Ira Schuman, who claims he bought eight Vanilla cards as holiday gifts for his staff members in 2022 and 2023.

Schuman bought the cards with $500 on each of them, but he later learned the cards had been completely emptied before his staff had been able to spend the money.

The complaint filed on Tuesday claims the cards, sold at retailers including CVS, Target and Walgreens, come in thin cardboard sleeves which can be opened by thieves.

The filing alleges thieves can record account information on the cards before resealing the non-reloadable cards without being detected.

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Once the account information has been recorded, the thieves can monitor the Vanilla gift card website to see when money has been loaded on to the card, before making purchases using the stolen information.

Thieves can spend the money on the gift cards using the stolen information. Credit: Matt Cardy/Getty Images
Thieves can spend the money on the gift cards using the stolen information. Credit: Matt Cardy/Getty Images

The scam has been dubbed 'card draining'.

Schuman, from Scarsdale, New York, has alleged Visa and two Vanilla card issuers knew, or should have known, that the cards were vulnerable to tampering.

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Schuman has also argued that the companies failed to add security features to prevent the cards being tampered with, and claimed they did not provide refunds when money was stolen.

The defendants in the case have been accused of violating a New York state law against deceptive and unfair consumer practices.

The lawsuit seeks compensatory and punitive damages for customers who bought Visa-branded Vanilla cards in New York and had their funds drained in the period since January 30, 2021.

Schulman's gift cards had been loaded with $500. Credit: Tiktok/@mssweetthang81
Schulman's gift cards had been loaded with $500. Credit: Tiktok/@mssweetthang81
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Tuesday's lawsuit comes after San Francisco City Attorney David Chiu sued Incomm, Pathward and two card issuers over the Vanilla cards in November.

Visa was not named as a defendant in the previous lawsuit, but Chiu accused the gift cards of featuring 'insufficient' packaging and 'lax security features' which made them more susceptible to scams.

Vanilla denied the claims made in the November lawsuit, telling CBS: "The allegations made in the San Francisco complaint have no basis in fact or evidence.

"We maintain an unwavering commitment to industry-leading security practices, including continually innovating to counter evolving fraudster tactics and collaborating with security experts, merchant partners, federal agencies and law enforcement to combat emerging threats and support industry-wide solutions."

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UNILAD has contacted Visa for comment.

Topics: News, Money, US News

Emily Brown
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