NBC 5 Responds

Sephora customers complain of $0 balance gift cards. Here's why

Complaints of gift card fraud against the company have been popping up online steadily for the last year. After weeks of reaching out to the company, NBC 5 Responds helped one woman get her money back.

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Almost half the people reading this story have a gift card in their wallet or at home right now, data shows. And if they bought a gift card from major beauty retailer Sephora, it's possible the card was drained before ever getting used.

How exactly does gift card fraud happen, and what should you do if you're targeted? NBC 5 Responds looked into it.

According to the Federal Trade Commission, gift card fraud is on the rise, costing consumers more than $217 million in 2023. The FTC says gift cards are specifically mentioned in about 25 percent of all the fraud complaints they receive.

That's rough news for gift-givers who rely on the cards as the perfect present, especially for pre-teens.

"That was the No. 1 on Morgan's Christmas list," said Uli Kalessa, from Arlington Heights. "Something, anything and everything from Sephora."

Kalessa gifted her granddaughter a $100 gift card to Sephora for Christmas. But a few days later, when 11-year-old Morgan tried to use the gift card, she got bad news.  

"They said there's a 0 balance, and I guess the associate at the store tried every which way to put it in manually and they're like, 'Sorry,'" said Kalessa.

NBC 5 Responds found dozens of similar gift card complaints posted on Sephora's website, TikTok and various Reddit forums dating back at least a year.

"All the comments were, 'They do nothing.' Sephora does absolutely nothing," said Kalessa.

Kalessa said staff at Sephora told her there was nothing they could do.

On the back of the gift card, Sephora tells customers to call its sister company, LGCS Inc., for all gift card issues. And then there's this disclosure on the back of the card, which states, "The value of this card will not be replaced if the card is lost, stolen, altered, destroyed or used without authorization."

So if it's stolen, you're out of luck.

"They've no doubt set this company up for perhaps liability reasons," said Ray Clopton, president of LocalGiftCards.com.

While Clopton doesn't work with Sephora, his company oversees the gift card programs of more than 6,000 small businesses.

"I can't really speak to their motivations, but it is unusual to say, you know, 'We are not the one selling you the gift card. This other company that we've set up is,'" said Clopton.

Clopton explained the different ways gift cards are now being hacked.

"The 'Check Your Balance' web page that most merchants have on their websites was starting to get hit by this bot or software that hackers had developed to say I'm just going to hit your website with thousands of balance inquiries until I hit on a valid number for the balance. And then I'm going to, as quickly as possible, go to your website, redeem that value," said Clopton.

But how are hackers getting gift card pin numbers? Kalessa said the Sephora gift card she purchased was not packaged and picked up from a stack of gift cards right by the register.

"It was right on the ledge, right in front of the register. And the associate picked the front one and rang it up," said Kalessa.

Clopton said scammers either tamper with the card’s physical packaging and return the cards to the store before anyone notices or there could be an online vulnerability.

"It is possible that somebody hacked into a database somewhere," said Clopton.

Frustrated after she says she received no help from Sephora, Kalessa put NBC 5 Responds on the case.

"I thought, 'Oh my God, I'm going to go to NBC 5 Responds because I love your segment.' And I'm like, you know, this is where I need to go. So I vented, did it. And within a day or two I got a response. I can't tell you how surprised I was that somebody actually listened to that," said Kalessa.

After weeks of NBC 5 Responds reaching out to Sephora, Kalessa said it finally contacted her and issued her a $150 e-gift card for her troubles.

A Sephora spokesperson told NBC 5 Responds: “Sephora takes combatting gift card fraud very seriously, and any incident reported to our client services center is reviewed, investigated, and supported by trained professionals. Sephora gift cards are an important gifting option for our consumers and it is our top priority to ensure that the experience remains exciting and trusted for everyone. The Federal Trade Commission has alerted consumers that gift card fraud is a persistent and growing issue across the retail industry, and Sephora has implemented comprehensive measures in an effort to protect our clients against gift card fraud and widely used scams.  We have implemented policies and practices to reduce gift card fraud online, in our stores, and where Sephora gift cards are sold, including gift card limits, employee training courses, gift card pin security, and more. Additionally, Sephora offers gift card fraud education and prevention tips, which can be found both on our website and in-store when purchasing a gift card.  Clients who believe they have been targeted by gift card fraud should contact our client service number (1-877-SEPHORA) or via the information on the back of the card."

NBC 5 Responds asked Sephora for more details about its "employee training courses," and it told us: "Our store teams are trained to redirect clients to our client service team or to contact the number on the back of the card, which is necessary for further investigation and resolution of any gift card issues."

And what about those dozens of online complaints from customers like Kalessa? A Sephora spokesperson told us: "Reports made on social media and online forums are not reliable or verified places for support or resolution."

"I can tell you for sure next Christmas, if anybody wants gift card money towards a gift at a certain store, I will put the cash in an envelope and mark it to that store because I don't think I want to go through this," said Kalessa.

Here are some key take-ways:

  • Be wary of buying gift cards that are not kept behind a cash register or display case
  • Purchase your gift cards with a credit card. Sometimes banks will refund you if the card is hacked, but not always.
  • Use your gift cards as soon as possible
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