FTC revs up money transfer case against Walmart

The Federal Trade Commission revved up its case against Walmart last week, alleging the retailer facilitated fraudulent transactions, despite a court ruling setback in March

The Federal Trade Commission last week doubled down on a lawsuit against Walmart over what it alleges was the retail juggernaut’s failure to protect consumers against fraudulent money transfer scams. 

The federal agency amended its complaint in U.S. District Court for Northern Illinois June 30, adding more counts against Walmart, after an adverse ruling in March. In that decision earlier this year, Judge Manish Shah partially granted a Walmart motion to dismiss the case, jettisoning one of two counts in the case. The FTC alleges Walmart assisted and facilitated violations of a telemarketing sales rule that restricts how telemarketers can do business.

The FTC revised its second count against the store chain and added two more counts to the case in the amended filing in its ongoing contention that Walmart was aware its money transfer services were being used to defraud consumers. The agency alleges the retailer not only failed to take action to prevent the fraud, but collected fees along the way. Consumers were bilked through sweepstakes scams, advance-fee loan cons and trick-the-grandparent schemes, among other frauds, according to the lawsuit.

The consumer losses have amounted to tens of millions of dollars annually in recent years, the agency said in the lawsuit, citing consumer reports. Money transfer services are available at about 4,700 Walmart locations, the agency said. Meanwhile, the retailer has pocketed millions of dollars in fees from providing money transfer services, the FTC contends.

“Walmart’s failure to take timely, appropriate, and effective action to detect and prevent fraud-induced money transfers at its stores has caused substantial injury to consumers that consumers cannot reasonably avoid themselves and that is not outweighed by countervailing benefits to consumers or competition,” the amended June 30 complaint says.

Whereas the initial FTC complaint filed against Walmart last June was 59 pages long, the amended complaint runs to 85 pages. The updated filing adds more detail to the agency’s allegations under the telemarketing sales rule, the FTC said in a June 30 press release.

Walmart has rejected the allegations. “The FTC is trying to salvage a flawed legal claim that they’ve already lost once, but the facts and the law have not changed,” Walmart said in a statement provided by a spokesperson. “We look forward to responding in court.”

In the amended filing, the FTC zeroed in on the rule’s ban of cash-to-cash transfers for telemarketing. After that ban was put in place in mid-2016, Walmart did nothing to comply with it for many years, the FTC alleges. 

The retailer sees it differently. “Walmart has a robust anti-fraud program to help stop third-party criminals who try to use money transfer services to commit fraud, and only a miniscule number of transactions relative to the overall volume of transactions are even alleged to be fraudulent,” the company said in its statement.

Nonetheless, the FTC argues that even now Walmart’s employees don’t ask consumers questions that might help thwart such fraudulent money transfers, the agency said. Nor does Walmart provide clear warnings to consumers that such cash-to-cash money transfers are prohibited, the complaint alleges.

“In addition to violating the cash-to-cash ban, for years, Walmart has provided substantial assistance or support to sellers or telemarketers that it knew or consciously avoided knowing have been violating the TSR,” the lawsuit said.

In contrast, Walmart argues that it has introduced competition into the money transfer market, taking on legacy players such as MoneyGram and Western Union. In the process, its flat-fee rates saved consumers – including the unbanked and underbanked – money, according to the company.

The Walmart2Walmart money transfer services advertised on its website say they’re offered for “Just $2.50*!” but then a footnote says the fees range up to $500, depending on the amount transferred and foreign exchange rates.

Walmart’s legal team has changed since the initial filing of the lawsuit last year with the exit of its general counsel announced in January. Karen Roberts, who had held the role for 10 years at the multinational retailer following her promotion to the position in 2013, left the company that month.

By Lynne Marek on July 6, 2023
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