Prepaid Debit Cards and Wire Transfers in Debt Collection Scams

Scammers call and demand immediate payment via wire transfer or prepaid debt card.  According to a recent statement from the Maine Attorney General

The red flag, however, is that they want you to make an instant payment with a pre-paid debit card or wire transfer. This is how you know you are getting scammed. Hang up the phone immediately.

Most people would probably be wary of the strangers demanding money over the phone. Some of these scams are unsophisticated. One call posted on youtube by a consumer includes the caller, a fake IRS agent, claiming to live in Las Vegas and commute to Washington on a daily basis. However, other scammers have enough information to make their calls sound genuine.

Typically the caller pretends they are from a business that you know and are attempting to collect an old debt. . . . The caller has just enough information about you that you believe they are legitimate.

Scam callers need information to make their calls believable. So, where do the scammers in get believable information in order to scam people? Jake Halpern’s book Bad Paper shows that the details of debts bought and sold by debt collectors are not kept secure, and in fact are sometimes sold, double-sold, triple-sold, and stolen. An excerpt from the book published in the New York Times magazine involves the theft of account details from one debt collector by another. The FTC recently brought a case against two debt buyers that exposed details of debts on the internet, for anyone to see. Poor data security makes the job of scammers easier.

Scammers also need a reliable way to take payment from consumers. Normal credit cards or bank transfers won’t do, because they are easier to trace and transactions can often be reversed by the bank. Traditionally, scammers have relied on wire transfer services like Western Union. However, another service is proving to be a popular alternative: GreenDot MoneyPaks. MoneyPaks are marketed as “an easy and convenient way to send money to where you need it. The MoneyPak works as a ‘cash top-up card’”. GreenDot warns customers against using MoneyPaks to send money to anyone other than a major company. However, MoneyPaks are a convenient way for scammers to take payment, because services like GreenDot and Western Union are hard to trace and impossible to reverse.