Visa USA Hit With Lawsuit Over Gift-Card Draining Vulnerability

A federal lawsuit has been initiated against Visa USA Inc., asserting that the company was involved in misleading practices through the sale of gift cards that thieves easily exploited, leading to significant financial losses for consumers. The plaintiff, Ira Schuman, accuses Visa of being aware or having insufficient safeguards against the susceptibility of Visa Vanilla gift cards to fraud but did nothing to enhance their security.

According to the lawsuit filed in the US District Court for the Southern District of New York, Schuman experienced a personal loss of $4,000 when the funds on his gift cards were illicitly siphoned by criminals in 2022 and 2023 before he could utilize them. Upon seeking assistance from Visa USA, Schuman recounts how his plea for help was essentially disregarded, culminating in his complaint being forwarded to a bank, whose identity remained unspecified to him, and which subsequently failed to address his grievance.

The legal action also involves Incomm Financial Services Inc., responsible for servicing and distributing the cards, and Pathward NA, the card issuer, marking them as co-defendants in the case.

At the heart of the issue, as stated in the complaint, is the allegedly faulty packaging of the gift cards. This defect purportedly allowed malefactors to access the cards undetected, note down their details, and then return them to their original racks seemingly untouched. This vulnerability enabled the so-called “card draining” by allowing unauthorized individuals to track the card balances online and make purchases until the funds were depleted.

Seeking to champion the cause of a broader demographic, Schuman aims to establish a class action on behalf of New Yorkers who have purchased Visa Vanilla cards since January 30, 2021, and have likewise fallen victim to fund drainage before the cards’ intended use.

The lawsuit, which cites violations of New York’s General Business Law, seeks a variety of legal remedies for the affected parties, including compensatory and punitive damages, alongside demands for restitution, equitable relief, and coverage of legal fees and costs.

Legal representation for Schuman and the proposed class is being provided by Wolf Popper LLP. As of now, Visa USA Inc. has yet to issue a formal response to the lawsuit’s allegations.

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