Chiu said he's suing InComm Financial Services, Inc. and its partner banks over insecure cardboard packaging of Vanilla gift cards that makes them "susceptible to rampant 'card draining' and unauthorized transactions."
Because of loose packaging, scammers can surreptitiously obtain the Vanilla card number, reseal the card and use the funds before a customer has a chance to use it, Chiu said.
The city attorney alleges Georgia-based InComm has known about the security problems with the non-reloadable debit cards for more than a decade and has refused to make fixes or provide refunds to consumers.
Although consumers have long reported the issue, the company hasn't modified its packaging, according to the city attorney.
The Better Business Bureau, Consumer Financial Protection Bureau, and other consumer rights organizations have reported hundreds of similar consumer complaints about card draining and InComm's refusal to refund unauthorized charges.
InComm representatives reached by email on Monday didn't address the lawsuit, but said the company reviews every complaint on a case-by-case basis to find a solution.
The lawsuit from San Francisco seeks penalties, restitution for impacted consumers, and injunctive relief to ensure additional consumers are not harmed.
