Michigan is cracking down on gift card fraud.
State officials say gift card fraud happens when someone takes a card, steals the redemption information, then puts it back on the shelf for an unsuspecting person to buy and activate. Fraudsters can steal the balance of the card before the purchaser can use it.
Newly signed state laws count that practice as organized retail crime, a felony.
The Michigan Retailers Association worked with lawmakers on the change. The association's vice president of governmental affairs, Drew Beardslee, said the new classification is a better fit for prosecuting gift card fraud.
“By putting it under the umbrella of organized retail crime, especially when, in Michigan, we’ve got a unit that is solely dedicated to investigating and prosecuting organized retail crime, it just made sense to put it all under the same statutory framework,” Beardslee said.
Before the law change, state officials used other statutes to charge people for card draining. Earlier this year, Michigan’s Attorney General's office charged a California man with conducting a criminal enterprise and possession of a fraudulent financial transaction device.
Conducting a criminal enterprise carries a maximum sentence of 20 years in prison. The possession charge is a four-year felony.
The new laws would carry maximum punishments of five years in prison, a $5,000 fine, and restitutions.
In recent years, the state and federal governments have put more resources into fighting gift card fraud and scams. Press releases on the matter often cite Federal Trade Commission data showing over $200 million in annual losses to scams in recent years.
Beardslee said it’s a crime people often don’t report after finding out their new gift card doesn’t work.
“A lot of times they assume they just got a dud, or it goes unreported and it’s maybe the value they put on it was just not so much they wanted to go back and redeem it. It’s hard to quantify exactly how much it is but it’s certainly something that’s been seen all over the country,” he said.
