A U.S. Senate special committee is looking into scams that use reloadable prepaid debit cards like Green Dot’s popular MoneyPak card to victimize consumers, less than a week after the Consumer Financial Protection Bureau proposed new rules that increase consumer protections for funds stolen from prepaid cards.
The Senate Special Committee on Aging heard testimony from executives from three prepaid card companies — Green Dot, InComm and Blackhawk Network — on Wednesday afternoon (Nov. 19), according to the New York Times. The committee’s focus was on what prepaid card companies and retailers that sell the cards can do to alert consumers of the potential for fraud.
Scammers are increasingly using the cards to target poor and elderly individuals, usually telling them by phone that they owe taxes or a utility bill, and giving specific instructions to pay the bill using prepaid cards that use PIN numbers for funds transfers. The scammers then ask the victim to give them the PIN over the phone — supposedly to confirm that they have followed instructions — and then remotely transfer the card’s contents.
Green Dot, the largest U.S. seller of reloadable prepaid debit cards, said this summer that it will phase out PIN-based MoneyPak cards by early next year and shift to a more secure electronic mechanism in stores for adding money to the cards. The new system is already in place in most Walmart stores that sell the cards. InComm said it also plans to eliminate PIN-based Vanilla Reload cards. Blackhawk Network, which offers a similar card under the Reloadit brand, said at the Senate hearing that it will discontinue PIN-based cards as of March 2, 2015.