BENTONVILLE, Ark. (KNWA/KFTA) — On June 28, the Federal Trade Commission (FTC) sued Walmart for allowing its money transfer services to be used by fraudsters who fleeced consumers out of hundreds of millions of dollars.
According to a press release, the FTC lawsuit alleges that for years, the Bentonville-based retailer “turned a blind eye while scammers took advantage of its failure to properly secure the money transfer services offered at Walmart stores.” The complaint adds that the company “did not properly train its employees, failed to warn customers, and used procedures that allowed fraudsters to cash out at its stores.”
The FTC is asking the court to order Walmart to return money to consumers and to impose civil penalties for Walmart’s violations.
“While scammers used its money transfer services to make off with cash, Walmart looked the other way and pocketed millions in fees,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “Consumers have lost hundreds of millions, and the Commission is holding Walmart accountable for letting fraudsters fleece its customers.”
In addition to its retail business, Walmart offers financial services to consumers in its stores, including money transfers, credit cards, reloadable debit cards, check cashing, bill payments and more. Walmart acts as an agent for multiple money transfer services, including MoneyGram, Ria and Western Union, offering some services under its own brand, like “Walmart2Walmart” and “Walmart2World.”
According to the complaint, tens of millions of money transfers are sent or received at Walmart stores each year, where they are processed by Walmart employees. Money transfers are services that people use to send money to a recipient in another location.
According to the FTC, they are “frequently used by fraudsters across a wide variety of scams” because they are nearly impossible to retrieve after the money has been picked up. The FTC has brought multiple cases against money transfer services in recent years, including against MoneyGram and Western Union, alleging they failed to protect consumers who used their services.
Walmart’s practice of “turning a blind eye to fraud had grave consequences for consumers,” according to the complaint. The complaint cites numerous instances in which law enforcement investigations found that scammers relied on Walmart money transfers as a primary way to receive payments, including in telemarketing schemes like IRS impersonation schemes, relative-in-need “grandparent” scams, sweepstakes scams, and others.
Based on information from fraud databases maintained by MoneyGram, Western Union, and Ria, from 2013 to 2018 more than $197 million in payments that were the subject of fraud complaints were sent or received at Walmart, with more than $1.3 billion in related payments also possibly connected to the fraud. The FTC’s investigation of Walmart’s money transfer practices showed, according to the complaint, that Walmart knew about the role money transfer services play in scams and frauds.
Walmart Corporate issued a statement in response to the complaint.
A narrowly divided Federal Trade Commission brought this factually flawed and legally baseless civil lawsuit after the Chair refused Walmart the due process of hearing directly from the company, and even the Justice Department refused to take this case to court. Claiming an unprecedented expansion of the FTC’s authority, the agency seeks to blame Walmart for fraud that the agency already attributed to another company while that company was under the federal government’s direct supervision. Walmart will defend the company’s robust anti-fraud efforts that have helped protect countless consumers, all while Walmart has driven down prices and saved consumers an estimated $6 billion in money transfer fees.Walmart Corporate statement regarding FTC complaint
In a Freedom of Information Act (FOIA) request regarding the case, an attorney for Walmart noted that the FTC “appears poised to pursue a novel and untested legal theory against Walmart that would represent an unprecedented expansion of the Agency’s power.” The FOIA request asked for multiple documents and communications regarding money transfer systems and the government’s monitoring of them.
The FTC filed the complaint in the U.S. District Court for the Northern District of Illinois.