FTC: Walmart ‘Turned Blind Eye’ to Telemarketing Rule Violations

Federal regulators have offered new details in a legal action involving Walmart’s money-transfer operations.

The Federal Trade Commission (FTC) announced Friday (June 30) that it had amended its year-old complaint against the retail giant, which involves the company’s alleged violation of federal telemarketing sales rules.

“According to the amended complaint, Walmart for years turned a blind eye while scammers took advantage of its failure to properly secure the money transfer services offered at Walmart stores,” the commission said in a news release.

The commission maintains that Walmart failed to properly train employees or warn customers, and used procedures that led scammers to cash out at its stores.

PYMNTS has contacted Walmart for comment but has not received a reply. Last year, the company asked a judge to dismiss the FTC’s case, calling it “an egregious instance of agency overreach.”

The company contends that the FTC is trying to hold it accountable “for the criminal actions of completely unrelated third-party fraudsters” and despite the retailer’s “extensive efforts to prevent those very fraudsters from defrauding our customers.”

The FTC said Friday that its complaint that Walmart had allowed those criminal actions to happen by permitting the payout of “transfers with characteristics of fraud” and by having either no anti-fraud policy or one that was ineffective and poorly enforced.

This is happening at a time when a majority of financial institutions (FIs) are reporting increases in fraud attacks on debit and credit cards, as PYMNTS’ research has shown.

“Crooks have their favorite go-to payment methods — and even types of FIs — when plying their pernicious trade. Fraudsters especially targeted credit cards, we found, as 64% of FIs reported an increase in fraud attacks using them.”

By way of comparison, 52% of FIs reported an increase in attacks on debit or prepaid cards while 32% of firms witnessed an increase in fraud rates connected to payments made with Venmo and 51% of firms saw an increase in fraud rates on payments made with Zelle.

In addition, the research found variations in attacks across more FIs of different sizes, along with an increase in the targeting of specific payment methods. For example, smaller FIs had the highest rates of increased fraud attacks in credit cards, with 66% reporting more attacks on that payment method, and prepaid or debit cards, with 61% saying they saw increases.

Smaller FIs also witnessed the greatest rates of increased rates of fraud among peer-to-peer (P2P) and rapid payment methods such as Venmo, Zelle and PayPal.