The San Francisco City Attorney's office has filed suit against prepaid debit card issuer InComm, claiming it allows thieves to too easily "drain" funds from off its Vanilla-branded cards.
"For years, numerous cardholders of nonreloadable Vanilla debit cards have discovered, often when using their card for the first time, that the money put on their cards is gone and the balance is $0," says the lawsuit, filed in San Francisco County Superior Court. "Hundreds of consumers have reported remarkably similar experiences of buying or receiving a Vanilla card, attempting to use it to pay, having the card declined for insufficient funds, and then learning the funds were spent by someone else – without the consumer’s permission, and before they ever had a chance to use the card."
The lawsuit cites the company's "insufficient security" for the draining of the card balances.
"Its lax security includes the packaging that Vanilla cards are sold in, which allows easy access to the card inside, as well as the
lack of other protocols that prevent anyone but the rightful cardholder from making purchases with a Vanilla card," the suit says.
The company has known about the problem for years but failed to fix it, the suit said.
"In contrast, many of Incomm’s competitors have implemented enhanced security features that significantly deter and prevent card draining. In fact Incomm has implemented such improved security features for its reloadable cards, and so it is inexcusable that Incomm has not improved the security and packaging of its nonreloadable Vanilla cards."
The suit restitution with interest to customers who have lost money on their cards, along with civil penalties of $2,500 per violation of California's Business
and Professions Code, plus attorney fees.
The lawsuit was brought on behalf of the people of the state of California by San Francisco City Attorney David Chiu.
People of the State of California v. InComm Financial Services, Inc., San Francisco Superior Court, CGC-23-610333