Monday, August 4, 2014

MoneyPak, the Fraudster's Friend, is Back in the News

Last week, the New York Times published another article about MoneyPak, the money transfer card that seems to be the most favored tool of a certain type of fraud. These past two years, there has thankfully been a decline among my clients and potential clients who use this service and get taken advantage of.

Rewinding the time machine to the summer of 2012, I had a series of consultations with clients who would receive threatening calls that they owed money on pay day loans, even though they had paid those loans off. The scheme would scare the people (usually those on a fixed income) into going to the local store and getting a MoneyPak and providing the information to the schemers. If they did not comply, they were threatened with the police coming to arrest them.

The clients who were more resilient would consult with a lawyer, who would quickly find out that it was a scam and that no money was owed. But more than a few clients would just transfer the money and, when they figured out it was a scam, would realize that there was no way to get their money back or even trace where the money had been transferred.

The New York Times summarized the situation,
Thousands of consumers have been lured into sending money through the card, called MoneyPak. For online fraudsters, the green-and-white paper card that can be used to quickly “reload,” or transfer, hundreds of dollars in cash onto another prepaid card is often the money conduit of choice, regulators and law enforcement officials say. 
The abuses are mounting as the market in prepaid cards is increasingly finding favor with Americans who don’t have access to a traditional bank account or credit card. The roughly $80 billion that consumers are expected to put on prepaid debit cards this year is double the amount put on those products in 2010, according to the Mercator Advisory Group, a banking industry consulting firm. Consumers also use the cards to transfer money into PayPal accounts to shop online. 
Law enforcement officials are also concerned about drug dealers and other criminals using MoneyPak to launder small sums of cash, because money transfers using the cards are hard to track. “We are increasingly seeing MoneyPaks used to facilitate Internet fraud schemes and it is a concern for us,” said David A. O’Neil, deputy assistant attorney general for the criminal division of the Justice Department. “Anything that makes it easier to get money from the victim to a fraudster concerns us.”

It looks like the federal Consumer Financial Protection Bureau is going to investigate and will hopefully find a way to end these scams.