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Pre-paid debit card scams: Recognize the red flags

PEMBROKE PARK, Fla. – Federal regulators are finalizing new rules to offer consumers better fraud protection in the growing market of pre-paid debit cards.

Despite its growth, the pre-paid market is still largely unregulated at the federal level.

New rules are expected in early 2016. Authorities said pre-paid card scams come in various forms. That is why the Call Christina team is working to make sure you recognize the red flags.

You can spot pre-paid cards on sale at convenience stores. The popularity of re-loadable pre-paid debit cards is on the rise, according to the market research firm GfK.

While there are legitimate uses for the cards, consumer groups and law enforcement said they have also become tools for scammers looking to steal your money.

After Local 10 News viewer Aida Huertas of Miami became the victim of a pre-paid card scam she "Called Christina," sharing her story to warn others.

It started with an ad last October to be a mystery shopper.  One of the assignments involved buying three Green Dot MoneyPak reload pre-paid cards for $500 each. She was then asked to provide the pin number on the back, which essentially unlocks the funds.

She did this even though the back of each MoneyPak card warned consumers not to give out the 14-digit code to people or businesses they don't know.

Huertas thought the person she was giving the code to was a legitimate business, in part because they had mailed her what she thought was a valid check for $1,700.

She even waited a day to see if the check would clear before performing what she thought was her mystery shopper part-time assignment.

The check turned out to be fictitious and she never heard from the company again. Huertas, who was struggling financially, which is why she picked up the "mystery shopper" gig in the first place was out $1,500 plus bank fees.

"Once you provide the number and the ability to cash out the money on the card the money is gone," Miami-Dade Police Department Economic Crimes Bureau Detective Marcos Rodriguez said. "And once it is gone, it's gone."

Rodriguez added that it is a difficult crime to prosecute.

"There's really no way of tracking this money because a lot of this money is not even in the United States per say," he said. "The money could be removed outside the United States, which pretty much falls outside the jurisdiction of any agency within the U.S. It's a jurisdictional problem where the money disappears to, how the money is taken out. The money, a lot of time, is taken outside the United States. Whereas law enforcement here, we have no jurisdiction. As far as the federal aspect of it, sometimes they don't have jurisdiction either."

Rodriguez said often "there's no real way of identifying this person or persons and get this money back."

The FBI has been tracking this sort of re-loadable pre-paid debit card scam.

READ: Two Charged in $5.8 Million Reloadable Debit Card Extortion Scam  

Pre-paid cards function like traditional debit cards but are not linked to a bank account and are in favor for its convenience and with people who don't have access to a credit card.

Rodriquez said there are plenty of legitimate uses for the cards to include parents of kids in college who want to limit the amount of money they have access to. Let's say the college-aged child needs more money for books. A parent can put more money on the re-loadable pre-paid card to cover the expense. Others like to use the cards to make online purchases or book hotel and car reservations.

The problem is scammers find them handy too.

Green Dot was having such an issue with fraudsters hijacking their MoneyPak cards that the company recently made a change: no more scratch off numbers. Customers now swipe cards at the register.

Green Dot spokeswoman Hayley Cook told Local 10 News, "MoneyPak was a service to reload pre-paid debit cards with cash, and it existed in the form of a physical 'pack.' Green Dot has phased out the PIN-based MoneyPak reload method. Now that this product is gone, consumers can still load cash onto their prepaid debit cards with Reload @ the Register."

The move gained the attention of U.S. Sen. Bill Nelson. The Democratic senator serves as Chairman of the Senate Special Committee on Aging and at a July 16, 2014 hearing he stated, "I can also report some good news today from Green Dot Corporation, which makes a product that has been one of the cards of choice for fraudsters in many of these schemes.Green Dot has announced plans to retire the MoneyPak card from store shelves nationwide. They've seen how this product has been used by scammers and have decided to do the right thing, even if it hurts their bottom line."

That was in July of 2014. Receipts provided by Huertas show she purchased the MoneyPak cards months later in October of 2014.

Rodriguez said what happened to the viewer is not unique to Green Dot.

"Her scam focused on the use of Green Dot money card, but this sort of scheme or scam isn't unique to that," Rodriguez said. "Every company that offers this service has the same issue."

Each scheme will have a different spin. You could be asked to purchase a pre-paid debit card to enter a fake lottery or to collect on a bogus prize. Scammers pose as bill collectors, sales agents, employers and government officials. The point is to recognize the red flags.

Rodriguez said just about any time you are asked to give up money to get money or are asked to send back money, it is a scam.

Once again, while there are legitimate uses for pre-paid cards, Rodriguez urges you to be wary of anyone asking you to make a payment exclusively with a pre-paid debit card.

"Once you provide the number and the ability to cash out the money on the card the money is gone," Rodriguez said.

Huertas said she braved telling her story to warn others to, "be aware, be careful (and) don't trust anybody."

The Consumer Financial Protection Bureau (CFPB) is drafting proposals to offer consumers pre-paid card fraud protection.

According to Director Rich Cordray, "The new pre-paid account protections proposed are important because they fill key gaps for consumers. People use prepaid accounts as a convenient way to store and access their funds, and many consumers see them as effective alternatives to checking accounts. But these products are still fairly new and most have not yet been brought within the coverage of federal consumer financial laws. By bringing prepaid accounts under the Electronic Fund Transfer Act, we are proposing to give consumers the basic protections – including safety of the funds – they have come to expect when they pull a debit card out of their wallet or shop online with it. All pre-paid consumers would receive the same basic protections as long as they register the card with the institution that provided it."

CFPB is now in the final stage of developing the new rules. The Bureau continues to review comments submitted from consumers, industry, and other stakeholders. They began accepting consumer complaints on pre-paid cards last July. They hope to deliver a final rule in 2016.

Click here to submit a complaint.

READ: Spring 2015 rule-making agenda.

Click here for more information on pre-paid debit card scams.

Follow Christina Vazquez on Twitter @CallChristinaTV

Follow Local 10 News on Twitter @WPLGLocal10