The Story of a PrePaid Scam

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Yesterday I wrote about my recent dealings in the world of gift cards and prepaid cards to earn miles and points.  “Manufactured spending” as it is coined by some is not my primary focus, but I do like to use some methods to shift around my spending to earn miles and points for purchases I otherwise would miss out on – like student loans, places I need to pay by check, etc.  What is interesting is that in the world of prepaid cards we often hear references to lots of fraud, scams, etc, but since that isn’t what we are using it for, most of us don’t pay much attention to these stories of theft, money laundering, etc.  Even folks on Flyertalk were the victims of some Vanilla Reload scams in Atlanta.  In fact when a store like Office Depot decides to stop carrying a product like Vanilla Reloads and cites fraud as a reason some in our community were skeptical and thought it must somehow be related to miles and points junkies who like to legitimately buy them in large quantities.

So while the story I am going to share is not directly related to miles and points, I think enough of us are involved with prepaid cards that it is at least tangentially interesting.  There is a older woman who lives on my street who has known my mom since she was born.  She knits the blankets that can be seen in virtually every picture of my kid on an airplane, and still substitute teaches high school at close to 90 years old – and if you can still hang with high school kids these days you certainly are not an archaic bump on a log.    Earlier this week she was contacted by phone and informed she had won some type of grant, and to claim it she needed to purchase some Green Dot Money Packs to pay for the transfer fees or something.  I’m not clear on all the details, but you get the gist.  It’s like all those lovely emails we get from Nigeria – just in the form of a friendly telephone call and prepaid cards.  In fact my mom also received a similar phone call that she quickly ended.

I would either never answer an unfamiliar phone number in the first place, or hang up immediately if someone called me with something like this.  However, she is from another generation, is more trusting, less familiar with scams, and chatted with them answering many of their very personal questions (much to the shock and horror of my family when we found out).  Turns out she went as far as to drive to the store they told her to visit to buy the Green Dot cards – Walgreens.  Here is where the story gets even more interesting.

She is obviously not at all familiar with prepaids, reloads, money packs, etc. so was asking for some assistance from the folks at Walgreens.  They heard enough of her story and why she was looking for them to assist her in identifying she was being scammed.  First kudos to a store looking out for their customers, but it also speaks to me that this isn’t the store’s first rodeo with scams involving this type of card.  Clearly this is just one story, but it brought home for me that we are dealing with products that are used for more nefarious purposes with some regularity, and if a store or a clerk ever raises an eyebrow at our purchases it might be for a good reason.  Not that it is fun being looked at funny while in the gift card rack. 

It also makes sense if a store (like Office Depot) decides at some point that the downsides with carrying them outweighed the profits.  Hopefully that won’t continue to happen at the places that do still carry these types of cards, but hearing about this experience helped me put into perspective some of the ways that stores handle these products and purchases.  It also reminded me to help watch out for your friends and family members who may be more trusting than most of us so they don’t get scammed!

Have you experienced any fraud, scam, or other issues involving these types of cards?

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  1. I’m one of the ones that posted in the FT forum. I got my $1000 back eventually from defrauded Vanilla Reloads.
    I’ve stopped purchasing them because almost all of them in my neighborhood (when available) look tampered with.

  2. I dont know how a scammer could have had a chance to buy any VRs at OD in a 30 miles radius of me. I bought every single one I found for months. There couldnt have been any left for anyone else. I know Im not a scammer so at least in my area it was crook-free.

  3. No experience with fraud/scam, but I just recently started buying smaller value GC’s at office supply stores. The curious thing is that in order to buy them, the cashier has to peel away a perforated strip to expose the bar code that needs to be scanned by the register. I’M guessing that this so someone cant see the bar code prior to purchasing??? Have you seen this type of card??

  4. Sometimes I wish there was a special form of ID that says we are not scamming the system so we could just show it to the people at the register. Not sure how this would be possible but maybe some special cvs high rollers card or something.

  5. @Johnnie, I’ve seen those Visa GCs at OD. Not sure the bar code means anything when only the numbers on the front of the card matter.

  6. Well…it looks that this scam is not fraud but some criminal outfits taking advantage of vulnerable (as in your neighbors case) or greedy people. Fraud with Vanilla was buying them with stolen ccs or people buying them themselves and calling in their cc company within a few hours or next day claining they did not make the purchase. Big difference!

  7. I was told at CVS and Walgreens that they had a lot of cards being purchased and charged back on, which is basically fraud on a cash instrument. After being explained that, I understood why they had issues with them.

    Fortunately, they can fight that fraud very well now. Refunds are no longer allowed on reload cards. And they can show that to the credit card companies as their policy.

  8. Why OD felt there was more fraud in VRs versus other GCs is beyond me. With VRs, to access the cash value, you need to either call a number (identifying where you are calling from) or log in to a website (where your IP address would be visible). While both of these are cloak-able to some degree, it seems to me that VR usage is much more traceable than regular gift card usage (you can spend Visa CGs easily and immediately, without the intermediate transfer step). GDs have the same step required as VRs.

  9. What a relief that the store employees stopped the scam in time. It’s rare to read a happy ending in scam stories.

    The Huffington Post did a story about this:

    The shift to prepaid cards seems in part to be due to tighter restrictions by MoneyGram and Western Union. Since wire transfers are tougher to pull off, the bad guys have switched to prepaid debit cards.

    As for why GreenDot, here’s an excerpt:
    “GreenDot’s MoneyPak system has become an especially popular method because funds sent through the system are untraceable and the company does not assume responsiblity for fraud or theft of funds.”

  10. @dubaych, I agree with the article you reference, especially with the observation that the tendency to not recognize untrustworthy people is tied to a overall feeling of comfort. As you age, you slowly accept that you have less ability to change the way things are, so you might as well do the best you can with what you have.

  11. The thing I took out of this is that I’m not the only one that doesn’t answer the phone if I don’t recognize the number. I only answer people I know – everyone else has to leave voicemail.

  12. Most of these scams (not all) involve some type of award (ie. money payout) for the victim. For some reason a some people be it age 20 or 80 never comprehend nothing in life is free. The best scams work by greed (not the scammer´s greed but the victim´s greed)

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