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InComm patented a type of packaging in 2017 that prints the activation code across both the packaging and the card. The company said in a statement to ProPublica that this method, which it calls split-barcode packaging, is more secure than fully covering an activation code. “If attempts to tamper cause the card and external barcode to become misaligned by a fraction of a millimeter, it prevents the barcode from being scanned and activated,” the company said. InComm declined to say what percentage of Vanilla cards use split barcode packaging but said that “every Vanilla Gift Card released in 2024 has new and innovative security enhancements included.”
The jockeying over the Maryland bill came as InComm is facing government scrutiny over card draining.
Last November, David Chiu, the city attorney of San Francisco, filed a suit against the company’s card division, InComm Financial Services, and three of its banking partners alleging that InComm has been aware of card draining for roughly a decade and showed negligence by not fixing Vanilla packaging and by failing to refund consumers. “InComm is selling these prepaid gift cards that it knows are susceptible to rampant theft due to inadequate packaging and security,” Chiu told ProPublica and alleged in the complaint. InComm Payments said it “vigorously denies the baseless claims” in the San Francisco city attorney's lawsuit. It filed a motion in May to dismiss the case, saying the California court lacked jurisdiction over the company, which is registered in South Dakota. Three of its banking partners similarly moved to dismiss the claims against them. A California Superior Court judge is slated to meet with attorneys in September. The lawsuit caught the attention of a federal lawmaker, Sen. Richard Blumenthal, D-Conn. In December, he asked the Federal Trade Commission to investigate InComm Financial Services, charging that its alleged “neglect and refusal to implement improved security features have unjustly harmed consumers.” (An FTC spokesperson said it “can neither confirm nor deny the existence of any investigation” into InComm.) “I remain concerned that fraudsters are continuing to take advantage of InComm’s lacking security features of their prepaid gift cards — ultimately inflicting financial harm on consumers across the country,” Blumenthal said in a statement to ProPublica. The company said it is not currently the subject of a memorandum of understanding, consent decree, or cease-and-desist from any regulator. It declined to say whether it had been contacted by the FTC in the past year or if it is currently the subject of an investigation from a government body. “InComm Payments has been at the forefront in developing innovative solutions to continuously combat emerging fraud threats over the past 30 years, and maintains that vigilance today by leveraging new technologies, packaging techniques, monitoring systems and other security practices to help protect consumers,” the company said.
As Kramer’s gift card bill advanced through the Maryland legislature, another industry trade group, the Retail Gift Card Association, floated a new proposal: allow the state attorney general’s office to decide whether a company’s packaging was sufficiently secure. Three days later, InComm proposed a new amendment to allow activation data to be revealed if the packaging “is more secure than it otherwise would be if the data were fully concealed.” Both ideas resonated with state Del. C.T. Wilson, the chair of the House Economic Matters Committee, who examined InComm’s packaging design.
“It's not that I was totally convinced that the thing that they showed me was the silver bullet. It definitely wasn’t,” he said. “But what I did not want to do was stop people from looking for more ways to secure the system.” Wilson incorporated language from InComm’s amendment and added oversight by the state attorney general’s office. The bill passed in April. The new packaging rules take effect next June, so companies have a year to come into compliance. While the law applies only to cards sold in Maryland, it’s likely the packaging changes will be rolled out nationwide because companies prefer to use the same cards across all states, according to Kramer and Cailey Locklair, the president of the Maryland Retailers Alliance. “It will change packaging nationally — it is not just a Maryland bill,” Locklair said. She predicted the new packaging will begin appearing in stores by the holidays, typically the peak time for card draining.
ProPublica Chinese Organized Crime’s Latest U.S. Target: Gift CardsA Blackhawk spokesperson declined to comment on any packaging changes it plans to make but said the company “will comply with any and all legislative requirements.” InComm also declined to share details on potential packaging changes, saying it wanted to avoid aiding criminals. But it said its split-barcode packaging “fully complies with the Maryland law.” “I think of a bill like this as the first domino” in combating gift card fraud, Kramer said, adding, “I think we ended up with a great consumer protection bill.”
Craig Silverman is a national reporter for ProPublica covering voting, platforms, disinformation, and online manipulation.
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