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Walgreens Gift Cards Theft of Value Class Action

Gift cards or stored-value cards have been growing in popularity over the past decade, but they have also been growing as a source of fraud. Walgreen Co. makes gift cards under its own name and for third parties. The complaint alleges that Walgreen failed to take adequate steps to prevent fraud and tampering with cards, such as ensuring that card makers and POS terminals can measure “jitter” for the cards or sending secure communication to customers about card activation.

Two classes have been defined for this action:

The Florida Class is all persons in Florida who bought gift cards at Walgreens during the applicable statutes of limitations.

The Consumer Fraud Multi-State Class is all persons in Illinois, Arkansas, Iowa, and Montana who bought gift cards at Walgreens during the applicable statutes of limitations.

Nowadays, the complaint alleges, regular credit and debit cards use the Europay, Mastercard, and Visa (EMV) standard. These use chips and PINs, which make them much more tamper-resistant and run code to perform an authentication with the issuer at the point of sale (POS).

However, EMV cards cost around $2 to create; older-style magnetic stripe cards cost only about 8 cents. The complaint claims that those who make and accept gift cards have decided that they would make less money if they used EMV cards. The cards in question in this case, the complaint claims, rely on a simple magnetic stripe to encode a static account identifier, which is more easily recorded, cloned and reused in later transactions.

Thieves sometimes steal funds from cards by getting information from real cards and making “clone” cards, according to the complaint.

One way to spot clone cards, the complaint says, is by measuring jitter. The complaint alleges, “In manufacturing physical gift cards, the encoding of bits on the magnetic stripe produces variations in the physical distance between transitions, which is known as ‘jitter.’ … Cards produced in automated facilities exhibit more consistent bit lengths compared to cloned cards, typically created by hand through inexpensive encoders, with greater variance in the placement of bits.”

The complaint alleges that companies can measure jitter with the right POS terminals, “which can detect counterfeit cards with 99.9% accuracy.”

Although Walgreen has been selling gift cards, the complaint alleges, it “failed to ensure that third-party card manufacturers and POS terminals were able to measure jitter in swiped cards.”

It also did not take other security measures, the complaint says, such as sending an email or another form of secure communication with instructions for activating the card, or training employees to thoroughly inspect gift cards for signs of tampering, such as crooked security tape or scrape marks.

Also, the complaint alleges that Walgreen did not warn customers that the gift cards it sells might be tampered with or compromised in some way.

Article Type: Lawsuit
Topic: Consumer

Most Recent Case Event

Walgreens Gift Cards Theft of Value Complaint

April 9, 2022

Gift cards or stored-value cards have been growing in popularity over the past decade, but they have also been growing as a source of fraud. Walgreen Co. makes gift cards under its own name and for third parties. The complaint alleges that Walgreen failed to take adequate steps to prevent fraud and tampering with cards, such as ensuring that card makers and POS terminals can measure “jitter” for the cards or sending secure communication to customers about card activation.

Walgreens Gift Cards Theft of Value Complaint

Case Event History

Walgreens Gift Cards Theft of Value Complaint

April 9, 2022

Gift cards or stored-value cards have been growing in popularity over the past decade, but they have also been growing as a source of fraud. Walgreen Co. makes gift cards under its own name and for third parties. The complaint alleges that Walgreen failed to take adequate steps to prevent fraud and tampering with cards, such as ensuring that card makers and POS terminals can measure “jitter” for the cards or sending secure communication to customers about card activation.

Walgreens Gift Cards Theft of Value Complaint
Tags: Fraud, Gift Cards, Loss of credits or gift card benefits, Negligence