Visa USA Hit With Lawsuit Over Gift-Card Draining Vulnerability

Visa USA Inc. deceptively marketed and sold gift cards to consumers that were easily drained of their funds by thieves, and refused to give refunds to customers who complained, a proposed federal class action said.

Ira Schuman alleged the company knew or should have known that its Visa Vanilla gift cards were vulnerable to tampering, but failed to implement reasonable security measures to make them secure.

Schuman lost $4,000 to thieves who drained gift cards he purchased in 2022 and 2023 before they could be used, according to a complaint filed Tuesday in the US District Court for the Southern District of New York.

Visa USA told Schuman it was unable to help him when he called to complain, and transferred his call to “an unknown bank” that provided him with a complaint form, the lawsuit said. The bank didn’t respond after he sent the form, it said.

Incomm Financial Services Inc., a servicer and distributor of the prepaid debit cards, and Pathward NA, an issuer of the cards, are also named as defendants.

Visa USA didn’t respond immediately to a request for comment.

The packaging in which the cards were sold was defective, allowing thieves to access a card and record its account number, then reseal the package and return it to the sales rack without being detected, the complaint said.

The thieves were then able to monitor the card’s balance at Vanillagift.com by entering the account number, expiration date, and CVV number, Schuman said.

They were also able to make purchases using the account number until the funds were drained, a practice known as “card draining,” the suit said.

Schuman seeks to represent a class of people in New York who bought a Visa Vanilla card after Jan. 30, 2021 that had its funds drained prior to use by the consumer or intended recipient.

The lawsuit brings a single count of violations of New York’s General Business Law.

Schuman is seeking compensatory damages, statutory damages, punitive damages, restitution, disgorgement, equitable relief, attorneys’ fees and costs, and pre- and post-judgment interest.

Wolf Popper LLP represents Schuman and the proposed class.

The case is Schuman v. Visa USA Inc., S.D.N.Y., No. 1:24-cv-00666, case filed 1/30/24.