Apple settles allegations of profiting from fraudulent gift cards

The Cupertino-based company was accused of failing to provide assistance to victims of a scam involving prepaid Apple gift cards and profiting from them. Apple and the plaintiffs have now reached a settlement with the help of a mediator, according to Reuters.

Apple has decided to settle the lawsuit, according to a filing in federal court in San Jose, California. Reuters reported that the company is drafting a formal agreement to present to a judge for preliminary approval. In June 2020, a class action lawsuit filed by 11 people said Apple had misled consumers by saying there was no way to track or refund the value of gift cards, but the plaintiffs said this argument was incorrect.

Scams involving prepaid gift cards like store cards and iTunes gift cards are on the rise, with the Federal Trade Commission (FTC) saying anyone asking for payment in gift cards is almost always a scammer.

Gift Cards' hold process makes it easy for Apple to avoid scams

These can include a variety of impersonators, some even claiming to be from a tech support department, asking for payment to fix a computer. Some scams involve a call posing as a family member in need of money right away.

When victims purchase a gift card, they are prompted to provide the gift card number and PIN on the back of the card. This information gives the scammers immediate access to the funds stored on the card. The scammers use the stolen cards to buy laptops, smartphones, and other high-value items. The iTunes gift card scam works a little differently, because the gift cards are used to purchase apps.

Apple holds the entire amount for about four to six weeks, from the time the app is purchased until it pays the developer. During this time, the company has the right to refund 100% of the card value. In addition, Apple also takes 30% of all app sales on the App Store. So Apple always has the ability to refund the money even if the scammer has been paid. It is still unclear how much Apple will pay the victims and when they will receive the compensation.

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