Apple accused of willingly profiting off gift card scams

Photo (c) chris-mueller - Getty Images

A class action suit claims the company is enriching itself while vulnerable seniors are exploited

You’d probably never think it, but gift card scams can be quite a cash cow for the brands the gift cards are from. At least, a new class action lawsuit thinks it is for Apple.

The lawsuit claims that the “ecosystem” of Apple’s App Store insulates the company from liability or loss resulting from iTunes gift card scams. 

“Any attempt by Apple to disclaim liability for loss or damage resulting from iTunes gift card scams would be unconscionable and unenforceable in light of its role in those scams and the profit that it makes and retains from such scams,” the suit states.

The cash cow

For some reason -- maybe the shame of having the wool pulled over their eyes or the hassle of filing a report -- most of the scammed consumers never file a report to the Federal Trade Commission (FTC) about the incident. The aggregate losses of those who do step up, however, exceeded an estimated $93.5 million during 2015-2019, with the dollar amounts increasing significantly each year. 

According to FTC data, iTunes gift cards make up nearly 24 percent of all gift card scams. Applying this percentage to the total haul works out to be more than $90 million for Apple.

“As a result, this publicly reported $93.5 million figure appears to be only the tip of the iceberg. If only 10 percent of scam victims reported to the FTC (versus local police, attorney general offices, Apple, or nobody at all), the iTunes gift card scam would approach $1 billion in scammed proceeds, with Apple retaining $300 million in commissions,” the plaintiffs claim.

The suit contends that Apple is fully cognizant of the boundless nature of the scam and has been for some time. The plaintiffs also claim that the company has the ability to lay hands on who might be responsible but doesn’t because it is motivated to let the scam play out since it reaps a 30 percent commission on any purchase made using the gift cards.

“Apple dedicates a webpage to [the information regarding the scam], but apparently does little more,” the lawsuit says, arguing that Apple opts for the profit off the scam-related commissions while “falsely inform(ing) the public that all scammed proceeds are irretrievable.”

Elder abuse

In addition to asking the courts to decide whether Apple aids and abets scammers in perpetrating gift card scams, the suit is also seeking a determination on whether Apple’s conduct constitutes financial elder abuse.

The attorneys lay out the possibility that Apple’s inaction essentially adds up to financial and/or elder abuse “because it took, secreted, appropriated, obtained, and/or retained” money from seniors that was wrongfully obtained.

Elder abuse has become a top topic in consumer protection circles. So much, in fact, that seniors now have an Elder Abuse Hotline to help protect them against scams. U.S. Attorney General William Barr has said that everyone needs to step up and not be afraid to report anything unusual.

“What makes these crimes particularly heinous is not only the vulnerability of the victims, not only the breach of trust involved, but also the victims’ stage in life – the victims usually do not have the opportunity to recover from the financial loss,” the AG remarked in a speech earlier this year.

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