For decades, the payment method of choice for scammers looking to collect money from victims has been through a wire transfer, like those provided by Western Union or MoneyGram. Victims wire the money from one location to another—sometimes even overseas—and criminals get away with untraceable cash. But recently, experts are noticing a shift. In 2014, for the first time in years, single-use prepaid cards—like Green Dot’s MoneyPak, InComm’s Vanilla Reload, Blackhawk’s Reloadit, and Bancorp’s NetSpend—have bumped wire transfers as the way most consumers are paying money to scammers.
In many cases, consumers are instructed by a scammer to take cash to a retail location, load it on to a prepaid card and either send the physical card to the scammer or the scammer’s accomplice. In other cases, consumers are asked to load cash on to the card and then provide a PIN or control number (viewable via a scratch-off on the back of the card) to a scammer, who can then deduct funds remotely. In both scenarios, scammers will try to convert the funds on the cards in to cash as quickly as possible so that the transaction can’t be stopped.
A complaint we received from a consumer in Phoenix, Arizona is typical of how these cards get used by scammers. She writes:
“This lady on Instagram said she was going to sell me two pairs of shoes for $300. She said to put $300 into a NetSpend Reload Pack. As soon as I did I sent her the code on the back of the card as she asked and then she completely ignored me. She stopped texting me and ignored all my calls. I called the Netspend company and there is nothing they can do about it.”
Another consumer from Woodstock, Maryland describes a call she received from someone impersonating an IRS agent:
“’Hi officer Julie Smith from Internal Revenue Service […] Don’t disregard this message and do return the call before we take any action against you. Goodbye and take care.’ My husband called back from his cell phone. They told him that he would be arrested for tax fraud if he didn’t pay. They had him go to Food Lion and buy $3,500 in Reloadit cards. They then asked for the number on the back. The money is now gone. Reloadit said that there is nothing that they can do.”
While scammers will always be on the lookout for new ways to get paid, consumers can arm themselves with the information they need to detect red flags:
- If you are asked to send payment via a prepaid card to someone you only know online or via the telephone, it’s likely a scam;
- Treat prepaid card PIN’s and control numbers carefully – if you give them out to someone else, it’s like giving them cash;
- If you do give a PIN or control number (or a physical card) to someone you suspect may be a fraudster, contact the prepaid card provider immediately. Unfortunately, consumers don’t enjoy the same protections on prepaid cards that they do on credit and debit cards, so you may not enjoy the same anti-fraud protections;
If you’ve been approached by a fraudster, or someone you suspect may be pushing a scam, report the incident to www.fraud.org.