Visa was sued Tuesday over gift card fraud. (representative picture)

A group of consumers has filed a lawsuit against Visa, claiming the card payment network did not do enough to prevent the theft of funds from prepaid “Vanilla” gift cards.according to ReutersIra Schuman, who is filing a class-action lawsuit in federal court in White Plains, New York, claims he purchased eight “vanilla” gift cards worth $500 each in 2022 and 2023 as gifts for employees holiday gifts. He was later disappointed to find that the card had been wiped, which led to him taking legal action.

Mr. Schumann claimed in his complaint that Visa and two “generic” card issuers knew their cards were susceptible to tampering but failed to provide refunds when funds were stolen. He also claims the defendants violated New York state laws prohibiting deceptive and unfair consumer practices.

According to the complaint, non-reloadable debit cards can often be purchased at popular retailers such as CVS, Target, Walgreens and various grocery stores. These cards are often packaged in thin cardboard sleeves, which unfortunately opens up opportunities for theft. Thieves can open these envelopes, record account information, and then reseal them without raising suspicion or being detected. The complaint alleges that they were able to monitor www.vanillagift.com to see when funds were being added and use stolen account information to make purchases. The scam is known as “card depletion”, it added.

according to ReutersMr. Schumann is currently seeking compensatory and punitive damages on behalf of an individual who purchased a Visa-branded Vanilla card in New York since January 30, 2021 and unfortunately ran out of funds.

Meanwhile, in a similar case in November, San Francisco City Attorney David Chiu sued Incomm, Pathward and two card issuers over Vanilla cards. San Francisco-based Visa is not named as a defendant.

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according to CNNThe lawsuit alleges that InComm and its partners “knew for years that the security features of its non-reloadable Vanilla debit cards were lax, resulting in multiple card depletion incidents” but “failed to sufficiently improve the card’s packaging or implement other changes to prevent Those losses.

The complaining company later accused InComm of poor customer service, saying “the defendants frequently failed to provide refunds for unauthorized transactions on Vanilla cards, in breach of their legal obligations.”