Walmart has agreed to pay $10 million to settle FTC allegations that it knowingly allowed scammers to exploit its money transfer services, while pocketing millions in fees from fraudulent transactions that harmed countless consumers.
Key Takeaways
- Walmart agreed to a $10 million settlement with the FTC over allegations it enabled scammers to exploit its in-store money transfer services from 2013 to 2018.
- The FTC’s complaint identified over $197 million in fraud-related payments through Walmart, with potential connections to over $1.3 billion in malicious activities.
- Despite allegedly being aware of the fraud, Walmart continued authorizing these transactions while earning substantial fees from the services.
- The settlement prohibits Walmart from offering money transfer services without implementing proper fraud prevention measures.
- Walmart did not admit wrongdoing but stated it shares the FTC’s goal of protecting consumers from fraud.
Retail Giant Accused of Ignoring Fraudulent Money Transfers
“The Federal Trade Commission’s lawsuit, filed in June 2022 in the District Court for the Northern District of Illinois Eastern Division, claimed Walmart was fully aware that scammers were using its money transfer services to defraud consumers yet did nothing to stop it,” according to the complaint, Walmart allowed fraudsters to cash out at its stores through services like MoneyGram, Western Union, and Ria from 2013 to 2018, earning substantial fees while turning a blind eye to suspicious activities that harmed consumers across the country.
The scope of the fraud was substantial, with the FTC highlighting over $197 million in fraud-related payments processed through Walmart’s systems. Even more concerning, these transactions potentially connected to more than $1.3 billion in malicious activities. Despite providing various financial services, including money transfers, credit cards, and check cashing with millions of transfers occurring annually, Walmart allegedly failed to implement adequate safeguards to protect its customers from predatory scammers.
FTC Criticizes Walmart’s Negligence
The FTC’s criticism of Walmart was particularly harsh, accusing the retail giant of prioritizing profits over customer protection. The complaint detailed how Walmart’s lax policies allowed suspicious transfers and large cash pickups to proceed without proper verification or scrutiny. This negligence created an environment where fraudsters could operate with minimal interference, targeting vulnerable consumers who believed they were using a trustworthy service backed by a major corporation.
“Walmart looked the other way and pocketed millions in fees,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection.
The FTC emphasized the particularly harmful nature of money transfer scams, as they typically result in permanent financial loss for victims. Once the money is transferred through these services, it becomes virtually impossible to recover, making prevention measures critically important. The commission alleged that Walmart’s failure to implement such measures demonstrated a severe disregard for consumer protection, essentially facilitating fraud by international and domestic scam operations.
Settlement Terms and Walmart’s Response
The $10 million settlement prohibits Walmart from offering money transfer services unless it implements comprehensive fraud prevention measures. These requirements aim to ensure that similar exploitation cannot occur in the future, protecting consumers from the types of scams that allegedly flourished under Walmart’s previous lack of oversight. The settlement represents an important step toward holding large corporations accountable for protecting consumers who use their financial services.
“Electronic money transfers are one of the most common ways that scammers tell consumers to send them money, because once it’s sent, it’s gone for good,” said Christopher Mufarrige, Director of the FTC’s Bureau of Consumer Protection.
While agreeing to the settlement terms, Walmart has not admitted to any wrongdoing in the matter. A company spokesperson expressed relief at putting the issue behind them while reaffirming their commitment to consumer protection. “We’re pleased to have this matter behind us. While it is clear in the agreement that we do not admit fault, we share in the FTC’s goal to protect consumers from fraudsters and continue to be dedicated to safeguarding consumers from fraud-induced money transfers,” the spokesperson stated.
The outcome of this case serves as a warning to other companies providing similar financial services that regulatory agencies are closely monitoring their fraud prevention practices and will take action when consumers are left vulnerable to scammers. The substantial settlement amount and required changes to business practices demonstrate the serious consequences of failing to protect consumers from fraudulent activities.
