Gift Card Update: “Granny Scam” Legislation March 2023
Certain states have recently enacted or proposed legislation requiring sellers of gift cards to warn customers and employees about gift card scams and what to do if they encounter such a scam. This month’s Client Alert summarizes new gift card scam legislation in New Jersey, New York, Maine, and Rhode Island.
New Jersey Gift Card Fraud Retail Training Law Enacted
New Jersey has enacted a law requiring sellers of gift cards to train employees regarding gift card scams. On April 29, 2022, the Acting Attorney General of New Jersey announced new guidelines pursuant to the Stop the Fraud Bill signed earlier in 2022. The law requires New Jersey retailers that sell gift cards to train their employees on how to identify and respond to gift card fraud. Covered employees must receive training by August 1, 2022 or within 45 days of beginning employment, whichever is later.
Retailers with stores in New Jersey should update their employment policies and procedures to include the newly required training. Companies that fail to comply with the new requirements could be subject to a civil penalty of $1,000 for each violation.
Required Training for Retail Employees
Pursuant to the guidelines, employers should train employees to follow a “if you see something, say something” approach. Accordingly, employees should be trained to identify the signs that someone might be the victim of gift card fraud. Examples include: (1) customers who are buying multiple gift cards, especially with high dollar values; (2) customers purchasing gift cards when they seem distressed; (3) customers who say they are purchasing gift cards to help a family member or pay their bills, and; (4) customers who quickly photograph the serial or PIN numbers on the back of a gift card.
Following the “if you see something, say something” approach, if employees see signs of gift card fraud, they should be trained to engage the customers and ask questions surrounding their purchase, or notify a supervisor who can then engage with the customer. Lastly, employees should understand how to report suspected fraud to their employer and to appropriate government agencies, pursuant to the employer’s policies and procedures.
Best Practices for Retailers
In response to the new requirements, the New Jersey Division of Consumer Affairs recommends the following best practices to retailers: (1) retailers should prominently post and maintain signs near cash registers or gift card stands to
warn customers about gift card fraud; (2) retailers should limit the number and dollar amount of gift cards that may be purchased at one time (which retailers are already required to do by the federal Prepaid Access Rule); (3) retailers
should encourage payments for gift cards via credit card which can be more easily cancelled, and; (4) retailers are encouraged to limit the purchase of gift cards to cash registers staffed by an employee instead of allowing purchases and activation at self-checkout stands.
New York Gift Card Scam Notice Law
New York enacted legislation requiring gift card sellers to post a warning of potential gift card scams. The notice must be “conspicuous” and located where the gift cards are displayed or sold, such as the register. The signage must (1) warn the purchaser of prepaid card scams and (2) advise the purchaser of what to do if they suspect they are a potential victim of a gift card scam. The law takes effect on June 20, 2023.
Model Notice Legislation
The New York legislature recently introduced companion bills that would require the Consumer Protection Division to provide a model form of disclosure to gift card purchasers regarding prepaid card scams. Senate Bill S1329 and Assembly Bill A1009, introduced in January 2023, direct the Consumer Protection Division to create a model notice that gift card sellers may print and display to comply with the Scam Notice Law described above.
The companion bills state that the legislation shall take effect on the same date as the Scam Notice Law, June 20, 2023. However, the bills have not yet been signed by the Governor and the model notice may not be published before the Scam Notice Law takes effect. While gift card sellers are encouraged to use the model notice language when it is published, retailers should begin planning to draft and display their own notice to ensure they meet the June 20, 2023 deadline for compliance.
Maine Financial Scam Notice Bill
The Maine legislature introduced companion bills LD 440 and HP 273 on February 2, 2023 regarding notice of potential gift card and financial scams. The bill proposes a requirement for gift card retailers and businesses offering financial wire transfers to provide printed or oral notice to purchasers about warning signs of financial scams. The information would need to be provided at the place of transaction. We will continue to monitor this bill as it moves through the Maine legislature.
Rhode Island Scam Notice and Training Bill
Rhode Island introduced a similar gift card scam notice bill on February 21, 2023. The bill proposes requiring retailers to post a conspicuous notice near where gift cards are displayed for sale that warns purchasers of prepaid card scams and provides instructions on what to do if they suspect they might be a victim of a scam. It also requires gift card retailers to train their employees on identifying and responding to gift card fraud. Violations would be subject to a $500.00 civil penalty. We will continue to monitor this bill as it moves through the Rhode Island legislature.
If you have any questions or would like to discuss the information provided in this Client Alert in more detail, please do not hesitate to contact us:
Jamie Ryan, at jryan@baileycav.com or (614) 229-3247; or
Jameel Turner, at jturner@baileycav.com or (614) 229-3260; or
Joan Colleran, at jcolleran@baileycav.com or (614) 229-3220.
