Prepaid money card MoneyPak becomes vulnerable to fraud schemes

For online fraudsters, the reusable card that can be used to transfer money as cash onto another prepaid card is often the conduit of choice, regulators and law enforcement officials reveal.

The abuses are mounting as the market in prepaid cards is finding favor with US consumers who don’t have access to a traditional bank account or credit card.

According to the Mercator Advisory Group, a banking industry consulting company, the roughly USD 80 billion that consumers are expected to put on prepaid debit cards in 2014 is double the amount put on those products in 2010. Consumers also use the cards to transfer money into PayPal accounts to shop online.

The schemes that use MoneyPak involve fraudsters posing as bill collectors, bail bondsmen, government officials or sales agents in e-mails, online advertisements 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.

To address this problem, US-based financial institution GreenDot expects that by 2015, 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 Federal Trade Commission mentioned that in 2013 Americans reported losing USD 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.