“Cash Reload” Scam, Draws FTC’s Attention

Jul 01, 2013

The Wisconsin better Business Bureau, on May 20th, 2013 warned of a scam using MoneyPak, Green Dot Corp’s reload service. The national business standards organization, Wisconsin chapter reports that consumers are being contacted by scammers with news of either having won a sweepstakes or lottery, or consumers are duped into buying a discounted service or product. The scammers then instruct the consumer to purchase a MoneyPaks in-order to access these offers or rewards.

The BBB of Wisconsin provided further details to the scam and mentioned that victims are approached by scammers, who insist to the consumer the importance of paying fees, using a MoneyPaks so as to receive the so called “offers and services”. It’s at this point that the victim purchases the reload card from retailers and contacts the fraudsters, who proceed by asking for the 14-digit code 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 BBB said, “Once you’ve given them that code, you’ve given them instant access, and the thieves can transfer your MoneyPak funds to their own prepaid cards.”

Lisa Schiller spokeswoman of Wisconsin Better Bureau is of the opinion that this type of scam is not only restricted to Wisconsin. Scammers have been known to ask victims to load $100 and $500 onto the Green Dots cards.  There are reports of a Wisconsin case, where a resident was scammed by being offered discounted cable TV. The individual loaded a MoneyPak card with $350 and went ahead to give the fraudsters the account numbers. Who subsequently drained the account.  Funds loaded onto a MoneyPak constitute a cash transaction, the victim was left without any recourse to recover the lost funds.

The 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 Federal Trade Commission points out that these types of scams are common with fraudulent telemarketers as there is minimal oversight in these practices and less consumer protection.

The Federal Trade Commission along with the AARP, a consumer advocacy group together with the BBB noted that there has been an increase on the number of cash reloads 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,” said the Federal Trade Commission.

The Federal Trade Commission points out that once the fraudsters have the authorization codes, they usually load the money onto their own cards or make quick withdrawals at an ATM or simply spend down the cards balance

“There 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.

Federal Trade Commission sought comments from the public concerning the proposed Telemarketing Sales Rule amendments. These amendments would make it impossible for telemarketers to access payment through the above payment options and also placing a ban on telemarketing recovery services.

 

 

Reference

“‘Cash Reload’ Scams Draw FTC’s Attention.” Sellingprepaid.com. N.p., 31 May 2013. Web. 26 June 2013.

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Having a merchant account allows an account holder to take advantage of merchant cash advances. When a merchant is approved for an advance, the business agrees to receive a lump sum of cash in exchange for an agreed-upon percentage of future credit card sales.

Pricing varies depending on the merchant’s industry, past credit card processing history, the type of business seeking the account, average ticket sales, and average transaction volumes.

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Several factors influence a merchant’s risk level. Though only one factor likely will not get a merchant classified as high risk, a combination of these may: business size, location, and industry, credit score, credit card processing history, a industry’s reputation for excessive chargebacks, a prior history of high chargeback ratios, and whether a merchant exclusively sells online.

Virtual terminals are stationed on a merchant’s website, making it easy for customers to make a payment or purchase online. Merchants or a payment processor can easily set up virtual terminals, so online businesses can accept credit and debit card and e-check transactions.

A merchant account is a business account with an acquiring bank. Without this business account, which actually works more like a line of credit, a merchant cannot accept and process credit and debit card transactions. Businesses need a merchant account to accept major credit cards via a static point-of-sale terminal, mobile card reader, or through a virtual payment gateway.

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