Who Gets Paid From the $1.525 Million Vanilla Gift Card Settlement? What San Francisco's Deal With InComm Means for Companies That Give Prepaid Cards
On October 23, the San Francisco City Attorney's Office announced a settlement of its 2023 lawsuit against InComm Financial Services, the company that sells Vanilla prepaid gift cards. The suit alleged that Vanilla's cardboard packaging let thieves record card numbers and drain balances before buyers or recipients could spend them. InComm denies the allegations and has agreed to fund $1,525,000 for Californians who lost money. How much each claimant gets depends largely on the paperwork they can produce.
From lawsuit to settlement
City Attorney David Chiu sued in November 2023 on behalf of the People of the State of California, naming InComm and its partner banks. The complaint described a scheme known as card draining. Thieves open the loose cardboard packaging on store racks, copy the card number, reseal the pack and wait. When a shopper buys and loads the card, the thieves spend the balance first. CBS News reported at the time that the city said InComm had known about the problem for more than a decade and had not changed the packaging. The city also said some consumers were refused refunds because InComm's records showed the card as physically present, even when the transaction took place hundreds of miles away. The city's stated aim then was to “compel InComm to adopt industry-standard security features to stop card draining.”
Neither the October 23 announcement nor the press coverage we read says anything about changes to Vanilla's packaging or security as part of the deal. Read it as compensation for past losses, not as a commitment about future cards. InComm told NBC it was “pleased to have worked with his office to resolve the matter.” Chiu told KQED the office had received “hundreds of complaints” and did not know how many Californians were affected.
Who can claim: a short Q&A
Who is eligible? According to the City Attorney's release, you must be a California resident who bought a Vanilla Gift Card in California between November 1, 2019 and September 30, 2024, or lawfully received one bought there in that period. You must also have been unable to use some or all of the balance because of unauthorized transactions that you believe came from package tampering, and you must not already have been refunded by InComm for that loss.
Does an employee who was given the card count? The release covers people who “lawfully acquired” a card purchased in California, so a gift from someone else, including an employer, appears to qualify if the other conditions are met. The release frames eligibility around California residents. We found nothing that addresses a business filing for cards it bought and handed out, so a company in that position should ask the claims administrator before assuming it can file.
Where and how? Online at cagiftcardsettlement.com, or by mail, by February 19, 2027. The claim form and an attestation signed under penalty of perjury are required. A separate Proof of Claim is optional. Per KQED, it asks for the purchase receipt, photos of the front and back of the card, and its transaction history.
Why records decide the payout
| What the claimant submits | Payment the release describes |
|---|---|
| Claim form + attestation + complete Proof of Claim | Full value of reported lost funds for each eligible card |
| Claim form + attestation + incomplete Proof of Claim | Up to 75% of reported lost funds, depending on documentation |
| Claim form + attestation, no Proof of Claim | Up to $15 per card, for at most two cards ($30 maximum); lowest priority, per KQED |
The release adds that payment amounts “may be adjusted based on the number and value of valid claims” and on what remains in the fund. It does not set out a pro-rata formula. Here is our own rough sense of scale: if every claimant took the no-documentation maximum of $30, the fund would cover about 50,800 people ($1,525,000 ÷ $30). Full-value claims for drained $100, $200 or $500 cards use it up much faster. A buyer who kept the receipt and the card number is in a far stronger position than one who kept neither.
What it means for HR, procurement and reward platforms
- Tell California staff who received Vanilla cards from you. If your company gave Vanilla prepaid cards as awards, holiday gifts or incentives between late 2019 and September 2024, a short note to California-based recipients is a cheap goodwill gesture. Include the deadline and the settlement website. Recipients file for themselves.
- Your order records are the proof. Receipts, card or serial numbers and activation dates are what move a claim from $15 to full value. If you still have purchase records for physical prepaid cards, pull them now and decide what you can share with an employee who asks. Check with legal before releasing anything beyond that employee's own card.
- Racked physical cards carry tampering risk that digital codes do not. Draining depends on someone handling the pack on a store shelf before it is sold. Codes delivered by email or link to a named recipient avoid that step, and they leave a record of every card issued, which is the evidence this settlement asks for.
- Gift cards are still taxable wages, drained or not. Under IRS rules a gift card from an employer is a cash equivalent. If a card was drained after you gave it, the payroll treatment of the original award does not change. Any restitution goes to whoever files the claim.
For the tax side of employee gift cards, see are gift cards taxable to employees under IRS rules. Rewordin's bulk gift card API sends digital cards to named recipients through a REST API or a CSV upload, and the reward catalog lists the brands available. This is our third gift card fraud story this month, after the unsealed warrant describing $5 million in gift cards issued through a hijacked support tool and the FTC's $139 million figure for older adults' gift card scam losses.
Sources
- San Francisco City Attorney's Office, “California residents who lost money from a Vanilla Gift Card because of unauthorized transactions may be eligible for a payment from the Vanilla Gift Card Restitution Fund” (PR Newswire, October 23, 2026), the primary source for the fund amount, eligibility, deadline, payment tiers and InComm's denial. prnewswire.com
- Nisa Khan, “Gift Card ‘Draining’: How to Apply for Compensation After San Francisco's Lawsuit,” KQED (October 23, 2026). Source for the Proof of Claim documents, the expected payment date, the low priority of no-proof claims and Chiu's comments. kqed.org
- Chris Chmura, “A new $1.5M fund will pay you back if a thief drained your gift card,” NBC Los Angeles (October 23, 2026). Source for viewer reports from 2022–2023 and InComm's statement. nbclosangeles.com
- CBS News Bay Area / Bay City News, “San Francisco city attorney files suit against gift card maker over ‘rampant card draining’” (November 20, 2023). Source for the 2023 allegations and the quoted aim of the suit. cbsnews.com
This article summarizes a government announcement and press reports about a settlement in which InComm denies the allegations. It is not legal or tax advice; check eligibility and deadlines on the official settlement website.
About the author
Maciej has worked in the digital gift card and rewards industry for over 5 years. For this story he read the San Francisco City Attorney's October 23, 2026 release, KQED's and NBC Los Angeles's reports on the settlement and CBS's 2023 report on the original lawsuit. He checked the eligibility and payment terms in the release against KQED's summary and calculated the claimant illustration.