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The Green Sheet Online Edition

June 10, 2013 • Issue 13:06:01

'Cash reload' scams draw FTC's attention

sellingprepaidOn May 20, 2013, the Wisconsin Better Business Bureau warned of a new scam involving Green Dot Corp.'s reload service, MoneyPak. The Wisconsin chapter of the national business standards organization reported that scammers are contacting consumers with news that they have won either a lottery or sweepstakes, or alternatively can purchase a discounted product or service, and then instruct individuals to buy MoneyPaks to fulfill the awards or offers.

The Wisconsin chapter provided details of the scam. Scammers tell potential victims they need to purchase MoneyPaks to be used to pay fees in order to receive prizes or prepay for merchandise. Individuals then purchase the reload cards from retail locations and then reconnect with fraudsters, at which point scammers ask for the 14-digit code found on the back of the card.

MoneyPaks are used to reload already purchased general-purpose, reloadable prepaid cards, such as Walmart MoneyCard or Green Dot's own proprietary prepaid cards. In a statement to consumers, the Wisconsin Better Business Bureau said, "Once you've given them that code, you've given them instant access, and the crooks can transfer your MoneyPak funds to their own prepaid cards."

Wisconsin Better Business Bureau spokeswoman Lisa Schiller said this type of scam is not local to Wisconsin, but is a national problem. She noted that scammers usually ask consumers to load between $100 and $500 on the Green Dot cards, with one Wisconsin resident victimized by the scam offered heavily discounted cable TV service.

The individual loaded $350 onto MoneyPak and then provided the account number to the scammer, who promptly drained the account, according to Schiller. Since the funds loaded onto the card was a cash transaction, the individual had no recourse to recoup the loss, she added.

TSR amendments sought

sellingprepaidThe Federal Trade Commission reported on May 21 that it wants to amend the Telemarketing Sales Rule to strengthen consumer protections against telemarketing abuses, such as cash-to-cash money transfers, "remotely created" checks and cash reload scams. The FTC said these types of scams are popular with unscrupulous telemarketers because there is little oversight of such practices and few protections for consumers.

The FTC noted that along with consumer advocacy groups, the AARP and the BBB, the commission has seen a 'significant increase" in the number of cash reload scams. "These schemes have involved payments made to cover taxes on purported lottery winnings, settle phony debts, pay for advertised goods and services, and obtain advance fee loans," the FTC said.

Once the scammers obtain authorization codes, they either load those funds onto their own cards and quickly withdraw the funds at ATMs or spend down the balance on the cards, the FTC added. The commission has furthermore found no upside to the schemes for consumers.

"[T]here has been substantial injury to consumers resulting from the misuse of cash-to-cash money transfers in telemarketing, and the injury resulting from cash reload mechanisms is mounting," the FTC said.

In fact, the scams "effectively and deliberately deprive consumers of the anti-fraud monitoring, accountability, and dispute resolution rights of other payment methods," the FTC said. Additionally, once consumers are scammed, further scams are perpetrated which defraud victims yet again. These so-called recovery services make promises to consumers to recover lost funds from previous scams, in exchange for a fee. "After the fee is paid, consumers rarely receive the promised services or recoup their losses," the FTC noted.

The FTC cited data from its Consumer Sentinel database that show the vast majority of these scams are perpetrated online, including email- and website-based scams.

Amend and protect

The FTC issued a Notice of Proposed Rulemaking to seek public comments on proposed amendments to the TSR. The commission said the amendments would make it a violation for telemarketers and others to accept the above-mentioned payment methods in any telemarketing transaction, as well as ban telemarketing "recovery services."

The FTC noted that previous amendments to the TSR included the creation of the National Do Not Call Registry and the curtailment of telemarketing calls that deliver prerecorded messages.

For this amendment proposal, businesses can submit comments until July 29, 2013, by going to https://ftcpublic.commentworks.com/FTC/tsrantifraudnprm/. end of article

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