MoneyPak, a Popular Prepaid Money Card, Opens Path to Fraud Schemes --- Federal authorities are sounding alarms about a wide range of fraudulent schemes involving a popular prepaid money card product. -- Thousands of consumers have been lured into sending money through the card, called MoneyPak. For online fraudsters, the reusable 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.” -- The federal Consumer Financial Protection Bureau recently said that it was looking into consumer complaints about prepaid cards. -- The abuse of MoneyPak, a perfectly legal prepaid card, has created a problem for its seller, Green Dot, the largest provider of reloadable prepaid debit cards, according to Mercator. -- A Pasadena, Calif., bank holding company, Green Dot says it now has a technological answer to address the worst of the illegal uses. A new electronic cash-transfer system it is installing in most of the 92,000 retail stores that sell its products will ultimately replace the MoneyPak altogether, the company says. -- Still, consumer advocates and some in law enforcement question whether the technological fix will work or whether fraudsters would then gravitate to similar but less popular products offered by other prepaid card companies. -- The schemes that use MoneyPak involve fraudsters posing as bill collectors, bail bondsmen, government officials or sales agents in emails, online ads or phone calls. Over the last two years, the Federal Bureau of Investigation has issued at least a half-dozen alerts about schemes involving a MoneyPak. -- In June, Victor Jones, of Arlington, Va., fell victim to one of those scams when he sent $267 to a company that promised to write him a $2,500 loan if he first sent it a handling and processing fee using a MoneyPak. A 33-year-old building services engineer, Mr. Jones never got his loan or his money back. -- Another victim was Diane Stephens, 54, of White Plains, who says she lost $2,000 when she sent money using a MoneyPak to a company she found online to participate as a “mystery shopper.” -- In most cases, the victim is directed to go to a Walgreens, CVS, Duane Reade or another big retailer that sells prepaid cards, buy a MoneyPak and have the cashier put as much as $500 on the card. The victim then is typically instructed to email the unique 14-digit access code on the back of each MoneyPak. With that code, anyone can “unlock” the card and transfer the money to another prepaid debit card either by going online or by calling an automated Green Dot phone line. -- To address this problem, GreenDot says it expects that by early next year, most stores will be able to let consumers add money directly onto an existing prepaid card by swiping the card through a machine connected to a Green Dot data-processing center. -- The new system, already in place in Walmart stores that sell Green Dot products, will render obsolete the kind of access codes presently on the back of every MoneyPak card. Customers will be charged the same $4.95 transaction fee as with a MoneyPak now. --- The Federal Trade Commission said last year that Americans reported losing $42.86 million to schemes involving prepaid products. Regulators and consumer advocates say the true figure is probably much higher since many victims do not report being ripped off because of the difficulty in prosecuting such cases and the embarrassment of being duped. - More, NYTimes, http://dealbook.nytimes.com/2014/07/31/popular-prepaid-money-card-opens-path-to-fraud-schemes/?action=click&contentCollection=Business%20Day®ion=Footer&module=MoreInSection&pgtype=Blogs