Copyright 2013.
The Green Sheet Inc.

'Cash reload' scam comes to light

O n May 20, 2013, the Wisconsin Better Business Bureau warned of a new scam involving Green Dot Corp.'s reload service, MoneyPak. The Wisconsin chapter of the national business standards organization reported that scammers are contacting consumers with news that they have won either a lottery or sweepstakes, or alternatively can purchase a discounted product or service, and then instruct individuals to buy MoneyPaks to fulfill the awards or offers.

The Wisconsin chapter provided details of the scam. Scammers tell potential victims they need to purchase MoneyPaks to be used to pay fees in order to receive prizes or prepay for merchandise. Individuals then purchase the reload cards from retail locations and then reconnect with fraudsters, at which point scammers ask for the 14-digit code found 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 directed at consumers, the Wisconsin Better Business Bureau said, "Once you've given them that code, you've given them instant access, and the crooks can transfer your MoneyPak funds to their own prepaid cards."

Wisconsin Better Business Bureau spokeswoman Lisa Schiller said this type of scam is not local to Wisconsin, but is a national problem. She noted that scammers usually ask consumers to load between $100 and $500 on the Green Dot cards, with one Wisconsin resident victimized by the scam offered heavily discounted cable TV service.

The individual loaded $350 onto MoneyPak and then provided the account number to the scammer, who promptly drained the account, according to Schiller. Since the funds loaded onto the card was cash, the individual had no recourse to recoup the loss, she added.

In related news, 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 reload" scams.

MasterCard pilots prepaid ID cards in Nigeria
Tuesday, May 21, 2013

N igeria is moving to electronic payments via MasterCard Worldwide-branded prepaid cards. In early May 2013, MasterCard reported at the World Economic Forum on Africa that it had entered into a pilot program with the Nigerian National Identity Management Commission for a national identity prepaid smart card. The pilot, which involves the rolling out of 13 million MasterCard-branded identification payment cards in the West African country, is the largest and broadest financial inclusion initiative of its kind on the African continent, the card brand said.

The National Identity Smart Card, which is targeted at unbanked Nigerians aged 16 years and older, will leverage Nigeria's National Identification Numbers (NIN) database in combination with an enrollment process that involves the recording of individuals' demographic and biometric data. Biometrics are comprised of fingerprints, facial picture and digital signature designed to authenticate cardholders and eliminate fraud and embezzlement.

The resulting National Identity Database will reportedly be the basis for other authentication and verification implementations, such as for driver's licenses, voter registration, health insurance, taxes, telecommunications and government benefits. As a Europay/MasterCard/Visa chip and PIN-enabled prepaid payment card, the National Identity Smart Card will be used to deposit funds, receive benefit payments and make purchases online and in brick-and-mortar locations.

MasterCard said that after the registration process is completed, it is expected that over 100 million National Identity Smart Cards will be introduced into the Nigerian population of 167 million. Access Bank PLC, a commercial bank in Nigeria, and Nigeria-based Unified Payment Services Ltd. will serve as the issuing bank and processor, respectively, for the pilot.

DOJ office indicts fraudsters in prepaid scheme
Thursday, May 16, 2013

O n May 9, 2013, a New York division of the U.S. Department of Justice reported the arrest and indictment of seven masterminds behind a large and sophisticated fraud scheme involving prepaid cards that netted the fraudsters $45 million. According to the United States Attorney's Office for the Eastern District of New York, the cybercriminals hacked into the prepaid card processing systems associated with two foreign banks to manipulate withdrawal limits on prepaid card accounts and hit ATMs in 26 countries with fake cards encoded with the hacked accounts.

The seven defendants in the case, all residents of Yonkers, N.Y., and an eighth who was reportedly murdered in late April 2013 in the Dominican Republic, apparently orchestrated two separate "Unlimited Operation" fraud schemes conducted between approximately October 2012 and April 2013. Unlimited Operations are characterized as such by their way of allowing fraudsters to abscond with virtually unlimited criminal proceeds.

The office of U.S. Attorney Loretta E. Lynch said the first scheme targeted the computer network of an unnamed processor of MasterCard Worldwide-branded prepaid cards issued by the National Bank of Ras Al-Khaimah PSC (RakBank) in the United Arab Emirates, and netted the fraudsters nearly $400,000. The second attack against the Bank of Muscat, located in Oman, resulted in about $40 million being withdrawn from ATMs in 24 countries.

ElectraCard Services, headquartered in Pune, India, and reportedly a processor of travel cards for RakBank, admitted it was hacked in the first attack, but not the second.

Report sheds light on 51 million underbanked
Tuesday, May 14, 2013

F actorTrust Chief Executive Officer Greg Rable defines the underbanked as people who have existing banking relationships, usually in the form of checking accounts, but for various reasons lack traditional credit options. To better define the approximately 51 million underbanked individuals in the United States, FactorTrust, which analyzes underbanked consumer data, issued the inaugural FactorTrust Underbanked Index.

Based on information gleamed from consumer-initiated credit inquiries and trade-line data from a variety of financial services companies, and augmented with other third-party data, FactorTrust found that:

• The average age of loan applicants was 30, with loan amounts trending upward based on the age of applicants; loan amounts peaked for applicants aged 45.
• Underbanked consumers average two years at the same home address, with 66.53 percent being renters.
• Females make up 62.05 percent of underbanked loan applicants, although average loan amounts for males was slightly higher: $559.99 to $530.57.
• 33.06 percent of the underbanked having a bachelor's degree or higher; those with degrees outperformed on repaying loans by 11.50 percent over loan applicants with high school educations or less.
• The average length of employment for underbanked consumers is 2.10 years, with the top employment sectors being retail (24 percent) and government (17 percent).
• The average monthly income for underbanked consumers is $3,061.08.
• Married underbanked individuals had a nearly identical loan default rate as single individuals (21.1 percent to 21.3 percent).
• The percentage of the underbanked defaulted on first payments to three of the top five banks at a rate of 13.89 percent to 22.97 percent; to four of the top 15 retailers at a rate of 18.57 percent to 28.01 percent; and to one federal government agency at a rate of 20.27 percent.

"We do not define an underbanked consumer by a score or by any combination of our 500+ attributes," Rable said. "All of the consumers in our database are considered underbanked because they have sought alternative credit options."

FactorTrust intends the Underbanked Index to be a quarterly report. A copy of the Demographic Edition of The FactorTrust Underbanked Index can be viewed at http://ws.factortrust.com/UnderbankedIndex/.

Michigan senator seeks EBT card restrictions
Thursday, May 9, 2013

M ichigan State Sen. Rick Jones, R-Grand Ledge, said he plans to introduce legislation to ban the use of state-issued electronic benefits transfer (EBT) cards at strip clubs and liquor stores in Michigan. "It is an obscene use of tax dollars meant to feed hungry children and provide the necessities of life," Jones said in an April 29, 2013, statement. "Booze and strip clubs need to be off limits to welfare money."

Jones told SellingPrepaid that Michigan's EBT card program for the Michigan WIC Bridge Card lacks oversight, with casinos reporting EBT cards being used to gamble away tens of thousands of welfare dollars, while college students without financial needs can sign up for the program and receive $200 a month loaded on the cards.

Jones cited the Middle Class Tax Relief and Job Creation Act of 2012, a new federal law that requires states to prevent EBT cards from being used at "ATMs located in casinos, gaming establishments, liquor stores, or any establishment that provides adult-orientated entertainment in which performers disrobe or perform in an unclothed state for entertainment."

Jones said Michigan could be fined 10 percent of the yearly Temporary Assistance for Needy Families funds it receives from the federal government for noncompliance with the regulations. He noted that the Michigan Department of Human Services, which implements the state's EBT card program, is in support of Jones' plan. "It's gonna happen," he said.

In June 2012, Michigan passed into law an act sponsored by Jones that mandates Michigan's DHS to work with ATM providers to create and implement a way of blocking Bridge Card users from withdrawing cash from ATMs. Michigan's Bridge Card program is managed by Xerox Corp.-owned prepaid card program manager and processor Affiliated Computer Services Inc.