In a significant development, Apple has decided to settle a lawsuit filed against the company in 2020, which accused it of failing to assist victims of a gift card scam and even benefiting from the fraudulent activities. The settlement follows negotiations conducted with a mediator, as disclosed in a filing with the federal court in San Jose, California.
According to a report by Reuters, Apple is in the process of drafting a formal settlement to be presented to U.S. District Judge Edward Davila for preliminary approval.
The lawsuit stems from a scam involving Apple’s prepaid gift cards, where victims received calls from individuals falsely claiming to be from the Internal Revenue Service (IRS). The scammers created a sense of urgency, alleging issues with the victims’ tax filings and pressuring them to pay off the supposed debt using Apple gift cards, either for retail or digital stores.
Despite warnings from Apple advising users not to share their gift card codes, many fell victim to the scammers. Once the code was shared, the fraudsters used the gift cards to purchase Apple products. For iTunes gift cards, scammers bought their own apps available on the App Store, effectively converting the funds into their bank accounts.
The lawsuit argued that Apple, despite its no-refund policy for gift cards, held 100% of the funds for 4 to 6 weeks before paying developers for iTunes gift cards. Additionally, Apple retained a 30% commission from each sale, leading to accusations that the company indirectly benefited from the scam.
The tech giant allegedly informed victims that it could do nothing once the money was spent and emphasized the owner’s responsibility not to share the gift card code. However, the lawsuit contended that Apple could have taken additional steps to assist victims even after the funds were misappropriated.
In June 2022, Judge Davila rejected Apple’s appeal to dismiss the lawsuit, asserting that the company could have done more to aid victims post-scam. The lawsuit covers individuals who fell victim to the scam between 2015 and July 2020.
As the settlement progresses, details regarding the amount Apple will pay to victims and the timeline for disbursement remain unclear. The case is identified as Barrett et al v Apple Inc et al, U.S. District Court, Northern District of California, No. 20-04812.
