A new ordinance in Shakopee will require consumers to show a picture ID to buy Visa, Mastercard or American Express gift cards with a credit card at stores, a move the police chief believes will reduce fraud.

The City Council passed the ordinance last week. It also prohibits buying the three types of gift cards in a self-service checkout lane.

“We know this ordinance will not stop all frauds, but we do believe it will significantly limit some of the opportunity for fraud to occur in our city,” said Police Chief Jeff Tate. “I really, honestly, don’t think we’re asking too much of retailers here.”

Tate said he believed the ordinance is the first of its kind in the state and possibly the nation.

Fraud is among the city’s top three reported crimes and increased 17% last year alone, he said, adding that investigating it takes extensive time and effort by police officers.

“Criminals favor these cards because they can get cash quickly, the transactions are largely irreversible and they can remain relatively anonymous throughout,” Tate said.

Thieves are using stolen or cloned credit cards to buy the third-party gift cards, which are available at a wide variety of retailers and can be used to buy anything, just like cash, he said.

Cloning, sometimes called skimming, occurs when someone obtains a person’s credit card details, copies them onto a bogus card, and then uses that card.

Tate explained how a criminal tried to use a stack of cloned credit cards to buy a Visa gift card last year at a self-service checkout. On his 36th try, he successfully loaded $1,000 onto the card and walked out.

“That’s too easy,” Tate said. “It’s time to put a speed bump in that smooth lane of traffic that they have right now.”

Tate likened the purchase of the three kinds of gift cards to buying medications like Sudafed, which require the purchaser to present an ID. Customers can still buy gift cards using cash or check without showing ID, he said.

Shakopee resident Brenda Arvidson found out in mid-March that a thief had made 13 purchases on her credit card at Walgreens and Cub Foods in Shakopee, spending about $3,400, she said.

“I learned that my card was cloned and the majority of purchases were gift cards,” Arvidson said. “This all happened in my community, in a place where I feel like I should feel safe.”

Arvidson said that sorting out the financial mess cost her time, effort and embarrassment.

The Minnesota Retailers Association, however, opposed the measure and spoke out about its effect at last Monday’s meeting.

“This ordinance sort of creates the impression ... that the retailer is doing something wrong and bad,” said Bruce Nustad, the association’s president. “If it’s worth doing, let’s do it at a macro level.”

He suggested that the council allow retailers to get together and brainstorm solutions before creating a mandate. Many stores are already taking steps to address fraudulent gift card purchases, he said.

The Council asked Tate to return in six months with an update on how effective the new ordinance is.