Visa Faces Lawsuit from Consumers Over Alleged Security Failure in ‘Vanilla’ Gift Card Scam
Consumers sued Visa on Tuesday after they said the card payments network failed to make prepaid “Vanilla” gift cards less likely to be stolen.
Ira Schuman, who is leading the proposed class action in White Plains, New York, federal court, said he bought eight $500 Vanilla cards for his employees as holiday gifts in 2022 and 2023, but later learned the cards had been emptied.
According to the complaint, the non-reloadable debit cards are sold at CVS, Target, Walgreens and other grocery and retail stores in thin cardboard boxes that thieves can open and then reseal without being noticed after entering account information.
Thieves can then monitor http://www.vanillagift.com to find out when money has been loaded and make purchases using the stolen account information, the complaint said. The scam is known as “clearing the cards”.
Schuman, of Scarsdale, N.Y., said Visa and the two Vanilla card issuers knew or should have known their cards were vulnerable to tampering, but they didn’t add security features or issue refunds when money was stolen.
Visa and the other defendants, Incomm Financial Services and Pathward Financial, did not immediately respond to requests for comment.
In November, San Francisco City Attorney David Chiu sued Incomm, Pathward and two card issuers over the Vanilla cards. San Francisco-based Visa was not named as a defendant.
Tuesday’s lawsuit accused the defendants of violating a New York state law to combat deceptive and unfair consumer practices.
It is seeking compensation and penalties for people who bought Visa-branded Vanilla cards in New York starting January 30, 2021 and saw their money drained.
The case is Schuman vs Visa USA Inc et al, US District Court, Southern District of New York, No. 24-00666.
