Phishing scams involving all types of payment methods are on the rise nationwide and the latest one in North Dakota involves Green Dot Corp.’s MoneyPak.
Fraudsters in North Dakota are resorting to the MoneyPak and other prepaid debit reload cards to scam consumers out of thousands of dollars in some cases, according to the state’s attorney general’s office.
“Scammers have moved to this new method of payment, reloadable debit cards, because there have been so many warnings about using Western Union and MoneyGram to wire money,” Attorney General Wayne Stenehjem said in a press release.
Stenehjem noted Green Dot Corp.’s MoneyPak cards are used in most cases. Consumers use MoneyPak to reload prepaid card accounts or add funds to a PayPal Inc. account.
Fraudsters are calling consumers to tell them they won money or are eligible for a grant but must pay an upfront fee to receive the funds. Consumers are then instructed to buy a MoneyPak for a specified amount.
Next, consumers are told to contact another scammer and relay the code associated with the MoneyPak. Scammers then drain the funds from the account.
“Since reloadable prepaid cards like the Green Dot MoneyPak are purchased with cash, the payments are untraceable and the card company will not refund the money,” Stenehjem said.
Indeed, Green Dot on its website warns consumers about scams involving MoneyPak. Green Dot tells consumers not to disclose their MoneyPak code to pay for something purchased through classified ads or to collect a prize or sweepstakes.
North Dakota’s attorney general’s office declined to discuss the matter beyond what was contained in its warning to consumers.
A Green Dot spokesperson told PaymentsSource in an email that the company recently partnered with the Consumer Federation of America to educate consumers about avoiding such scams.
“Green Dot definitely warns consumers against sharing their MoneyPak number very aggressively,” the spokesperson says.
Ben Jackson, senior analyst at Mercator Advisory Group, tells PaymentsSource Green Dot’s two-step reload process presents an opportunity for fraudsters to move funds electronically and anonymously.
Jackson does not believe the two-step reload process is a problem for prepaid providers “but it provides another layer of anonymity that can make it hard for this type of thing to be tracked.”
That, in turn, gives the industry another stigma to fight off.
“There’s this perception that’s unfounded that prepaid is the tool of criminals and maniacs and it’s just not,” Jackson says.
He also notes the district attorney’s office lack of familiarity with prepaid products. The office’s press release consistently refers to the MoneyPak as a prepaid card when it is indeed a reload mechanism.
“That certainly doesn’t help the industry at all,” Jackson says.
A lack of general consumer awareness about how prepaid cards work likely is leading to successful scam attempts, Parrell Grossman, director of the attorney general’s consumer protection division, said in a press release.
“We are aware of a Bismarck victim who lost over $17,000 and another incident in which the Bismarck Police Department foiled this scam when they were contacted by the potential victim,” Grossman said.
Grossman believes the scam is targeting multiple state residents.
This is the second such scam to affect the prepaid sector in the past two weeks.
Consumers receiving unemployment benefits on a Bank of America Corp. prepaid debit card in California are alerting state officials about a telephone phishing scam intended to elicit personal information (see story).
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