Aging Panel Looks into Debit Card Scams

Published in Pawtucket Times, November 21, 2014

The U.S. Special Committee on Aging continues to direct its investigative spotlight on phone scams involving reloadable prepaid debit card.  Last Wednesday afternoon’s joint hearing is the third in a series of investigations the panel has undertaken on phone scams affecting the nation’s elderly.

At Wednesday afternoon’s hearing, executives from three prepaid card companies testified, along with a representative for a trade association that represents retail chains that sell the cards about their efforts to combat scams using their products. Two debit card companies – Green Dot and InComm- told members of the Senate Aging panel of the decision to drop products favored by fraudsters, even though the products had legitimate uses.  Although the third company, Blackhawk, did not drop products, it tightened up its security measures on its similar reloadable debit card product.

Putting a Light on Common Scams

Last year, the Senate Aging panel took a look at Jamaican lottery schemes, which the Federal Trade Commission (FTC) resulted in an estimated $300 million in losses for victims in 2011.  Following this hearing, another hearing examined the rise of grandparent scams in which a fraudster takes on the role of a grandchild or law enforcement officer to trick seniors into sending money to get their grandchildren out of jail.  In both incidences, scammers routinely instructed seniors to send them money via reloadable prepaid debit cards.

At the Nov. 19 Aging hearing, Chairman Bill Nelson (D-FL), of the Senate Special Committee on Aging, acknowledged that it is difficult to stop fraud against seniors, but “we are chipping away on it.”  He reported that federal legislation, “Phone Scam Prevention Act of 2014”cosponsored with Senator Joe Donnelly (D-IN), was introduced that day to make it easier for persons to actually know who is calling them, and give them the tools to protect themselves against fraud.

Adds, Ranking Minority Member Susan M. Collins (R-Maine), a common theme emerging from the Senate Aging panel’s hearings on senior scams is the use of prepaid debit cards. “Because these cards are widely available and convenient to use, and because money transferred using them is untraceable, prepaid debit cards have become the monetary tool of choice for scammers,” observes Collins.

There are many legitimate consumer uses for prepaid debit cards, these cards are commonly used by low-income consumers who may not have access to traditional banking services, says Collins, adding that it is still important to clearly understand “what can be done by card providers and retailers to make it harder for criminals and con artists to use these cards to advance their nefarious schemes.”

Adds Senator Sheldon Whitehouse, a member of the Aging panel, “Seniors are too often targets of phone scams that rely on pre-paid debit cards or wire transfers.  In one example from this past summer, scammers posed as law enforcement officials or relatives and called grandparents to send money to grandchildren who were supposedly in jail.  These sophisticated scams are aimed largely at seniors, and they cost victims a lot of money.  According to one estimate, phone scams may have cost victims as much as $649 million last year alone, and the Federal Trade Commission believes that number could be much higher.”

“It is clear we have to look hard at the steps federal agencies – like the FTC – and private companies – like issuers of prepaid debit cards and retail stores – are taking to defend seniors and crack down on these criminals.  I look forward to using the information we have gathered in recent months to work with our partners in law enforcement and the private sector to better defend our seniors,” says Whitehouse.

From the AG’s Office

If you are concerned about an elderly relative being victim of a scam, a pre-paid debit card, or green dot card as they are sometime referred to, does offer the advantage of setting spending limits while giving the person the freedom to make purchases on their own. Unfortunately, there is downside.  If a person falls victim to a scam that utilizes a pre-paid debit card, there is no recourse with the financial institution to get the money back,” said Attorney General Peter Kilmartin. “Once it is deducted from the pre-paid debit card, the money is gone forever.”

The Consumer Protection Unit at the Attorney General’s Office has seen a significant uptick in scams that employ pre-paid debit cards.  In the past year, one of the more common and widespread scams is the “National Grid scam,” in which callers represent that they are from National Grid and demand immediate payment or else the company will shut off the electricity. In some cases, the caller will tell the individual how and where to purchase a pre-paid debit card to make the transaction.

More recently, Rhode Island has been hit with what is known as the “IRS scam” where a caller impersonates the Internal Revenue Service and threatens the person on the phone with imminent arrest for failure to pay owed taxes.  Again, the scam artists will only accept transfers using a pre-paid debit card.

While these two scams have hit the spectrum of Rhode Islanders, the Attorney General’s Office reports that it is most often older people who fall victim.  “Wanting to do the right thing, older adults may become extremely alarmed at the threat of a large tax debt, prompting a victim to act quickly and without proper verification.  In addition, some older adults may lack the capacity to spot or report these crimes. Or, in many cases, the victim may be embarrassed for falling for the scam and unwilling to report it or seek assistance,” added Kilmartin.

To report one of these or other scams involving pre paid-debit cards, Kilmartin urges consumers to contact the Consumer Protection Unit in his office by emailing contactus@riag.ri.gov.  “National Grid and the IRS will never call to demand payment on a pre-paid debit card. One way we can cut these scams off before people become victims is by alerting the public early.  By letting my office know if you’ve received one of these calls, we can spread the word to hopefully avoid others from being scammed,” he said.

Herb Weiss, LRI ’12, is a Pawtucket writer who covers aging, health care and medical issues.  He can be reached at hweissri@aol.com.

 

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