Maryland becomes first state to pass law against gift card draining

Maryland is the first state in the nation to pass a law aimed at thwarting an increasingly common scam known as gift card draining. 

The Gift Card Scams Prevention Act of 2024, recently signed by Maryland Gov. Wes Moore, mandates that gift cards sold in stores be encased in secure packaging so that thieves can't illegally obtain their numbers. Under the new law, merchants that sell gift cards online must register them with the Office of the Attorney General's Division of Consumer Protection, while sellers also must train employees on how to detect gift card fraud. 

In carrying out such scams, criminals steal gift cards, obtain their card numbers and drain the cards' balances, before returning them to store shelves so they are worthless when purchased by consumers.

Without proper packaging, experts say, the funds stored on gift cards are vulnerable because their barcodes and PIN numbers, concealed only by a scratch off sticker, are visible. Thieves can easily remove the sticker covering the PIN and replace it with a new one so a card appears to be unused. 

Data released by the Federal Trade Commission in May showed that gift card scams, which multiplied during pandemic, accounted for $228 million in losses in 2023. Chinese crime rings in particular used this type of fraud for illegal gains, according to a ProPublica report. The U.S. Department of Homeland Security has launched a task force to fight card draining. 

A 2022 report from AARP found that about one-quarter of U.S. consumers say they have either given or received gift cards that had been depleted of their funds.