Gift card scams are a common tactic used by scammers to trick people into buying gift cards and providing the codes on them so criminals can steal the money without anyone noticing. Companies like Google earn commissions from these gift card purchases and, depending on the outcome of the lawsuit, have no obligation to refund victims.
The story took place in April 2021. Judy May, a resident of Brownsville, Indiana, was deceived by a scammer posing as a relative. The scammer told her that if she purchased a Google Play gift card, she would be eligible for federal subsidies.
May was told she needed to send the code on the back of the gift card to cover certain upfront costs to get the grant delivered the same day. She said she lost $1,000 to the scam - money that Google refused to refund.
May proposed a class-action lawsuit against Google, accusing the company of illegally profiting from the scam by refusing to provide refunds. The lawsuit also claims that Google engages in a series of unfair practices and should put warnings on its gift cards to inform buyers of potential scams.
U.S. District Judge Beth Labson Freeman dismissed the lawsuit this week. It was the scammers, not Google, who persuaded May to buy the cards, the judge said, adding that the plaintiffs had failed to prove that Google knew it had received stolen money or caused losses.
Google takes a commission of 15% to 30% from gift card purchases. Judge Freeman said the tech giant was not responsible for collecting the money because Google's actions were unrelated to the original fraud.
Freeman also said Google did not engage in unfair practices and agreed with the company that funds were not considered stolen when May purchased the cards. May also failed to prove that Google deployed technology to detect fraud when she made purchases.
Freeman ruled that "May suffered financial losses due to fraudulent inducements by third-party scammers, not Google's negligence or misrepresentations."
May can then try to refile the amended lawsuit within the next 45 days, and the judge also dismissed a request for treble damages because it "failed to show that, given May's knowledge of the gift card scam, she was likely to be a victim of such a scam again."
Americans lost $217 million to gift or recharge card fraud last year, according to the Federal Trade Commission, and that only includes reported cases, meaning the actual amount is likely much higher. May said Google Play cards account for 20% of gift card fraud.