Prepaid-debit-card providers like to make the argument that their products can be used just like bank accounts, but there’s one major way in which prepaid debit differs from bank-issued cards tied to an account or line of credit: if you get scammed when using the popular prepaid product, you don’t have any legal protection or recourse to get your money back. Which may be why the criminals behind so-called Nigerian 419 scams have incorporated prepaid cards into their con game.
You probably get some variation on this scam in your e-mail inbox occasionally. An unknown sender claims to be connected to a foreign-government agency and informs you that you’ve just won a local lottery. You’re asked to pay what seems like a small amount in comparison to your “winnings” before you can collect. Needless to say, people who fall victim to this scam never see those nonexistent millions — or the money they sent to claim them.
In law-enforcement terms, these are called advance-fee scams; colloquially, they’re called Nigerian or 419 scams, after the section of the Nigerian legal code that deals with fraud. The names are somewhat inaccurate because these swindles originate from all over the world.
In another version of the fraudulent operation, a would-be victim gets a message from a sender purporting to be a foreign official or royalty. The sender has lost access to his or her fortune, the story goes, and needs your help — and money — to help recover it, after which you’ll be rewarded. Of course, this tale ends just like the lottery swindle: the money and the person who was supposed to make you rich both vanish without a trace.
Con artists have traditionally preferred money-transfer services like Western Union to execute these scams, but some are now moving to prepaid debit products like Green Dot’s MoneyPak card. The company describes MoneyPak as a “cash top-up card.” It’s a prepaid, nonreloadable card that consumers pay cash for at a store and then use to reload a prepaid debit card.
The Consumer Federation of America warns prepaid-card users not to purchase goods online or from an unknown seller via Green Dot’s MoneyPak because there’s no recourse if the seller turns out to be a crook and disappears with the money. Unwitting customers can get a false sense of security if they consider the MoneyPak to function like bank-issued cards. In reality, it’s more like a wire transfer.
“Both of our agencies are noticing that more and more scammers are moving away from seeking payments via wire transfer and instead asking consumers to give them money via MoneyPaks,” said Dana Badgerow, president and CEO of the Better Business Bureau of Minnesota and North Dakota, in a statement issued last year. “We feel this is likely due to the fact this form of payment is quite convenient – for both consumers and scammers – and untraceable.”
Green Dot is aware of the problem. Its MoneyPak website home page has a big warning about scams involving the cards. It also inadvertently highlights what consumer advocates say is the biggest problem with prepaid debit: the lack of consumer protection it provides. ”If you give your MoneyPak number to a criminal, Green Dot is not responsible to pay you back,” the website warns. “Your MoneyPak is not a bank account. The funds are not insured against loss.”