The Federal Trade Commission is suing Walmart for allegedly ignoring fraudsters’ use of its money transfer services, alleging that negligence by the retail giant cost consumers hundreds of millions of dollars.
Walmart knew that telemarketers and scammers were persuading people to send money through the retail chain, but it failed to train employees to detect fraud, and it didn’t make changes to prevent scam transactions, the FTC alleged in a lawsuit Tuesday.
The Bentonville, Arkansas-based retailer sends money transfers through partners like MoneyGram, Ria and Western Union. Records from those companies indicate that Walmart locations processed some $197.3 million in transfers that led to complaints, along with $1.3 billion in related transactions that may also have been fraud-induced, the FTC said.
“While scammers used its money transfer services to make off with cash, Walmart looked the other way and pocketed millions in fees,” Samuel Levine, director of the FTC’s Bureau of Consumer Protection, said in a press release.
In a statement, Walmart called the lawsuit “factually flawed and legally baseless” and noted that it was approved by a “narrowly divided” agency. The FTC voted 3-2 to approve the lawsuit, with the agency’s two Republican commissioners voting against bringing the action.
“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 said.
Walmart’s statement did not name the other company that it faulted, but in a separate
In 2018, MoneyGram
In a statement, MoneyGram said it is not a party to the FTC lawsuit and that it has "worked closely with Walmart on anti-fraud efforts to protect consumers." It also said it has implemented numerous initiatives to drive "fraud rates to record lows," with fraud complaints consisting of 0.013% of the 95 million money transfers the company processed in 2021.
"MoneyGram is proud of its long-standing relationship with Walmart and looks forward to continuing to partner with Walmart on protecting consumers while providing convenient and affordable money transfer services for consumers, especially those consumers who lack access to traditional financial services," MoneyGram said.
Walmart wrote a
Last month Western Union sharply cut its prices to keep pace with the retail giant, several months after MoneyGram took a similar step. The developments offer a reminder of Walmarts consumer finance ambitions.
The FTC is seeking more than $46,000 from Walmart for each alleged violation of its Telemarketing Sales Rule. The agency said the frauds perpetrated against Walmart customers included lottery scams, government impersonator scams, and “grandparent” scams, in which people fraudulently ask people for money to get relatives out of trouble.
The lawsuit, which was filed in federal court in Illinois, is the latest action from the FTC against a company in the money transfer industry. The agency has tangled in the past with
After a monthly review of its partners in 2017, MoneyGram flagged to Walmart that the retailer's employees were not adequately reporting or escalating suspicious activities, the FTC’s lawsuit said. Two years later, MoneyGram’s reviews of 476 Walmart stores in several states found that at least 40% of Walmart employees needed more training on how to deal with suspicious activity.
MoneyGram's statement said it started requiring customer IDs at the point of sale for every transaction in 2018 and worked with Walmart to implement the policy, adding that the FTC "positively cited that Walmart implemented this practice as a direct result of MoneyGram’s initiative."
Ria also flagged similar issues in its reviews of Walmart stores, the lawsuit said.
The FTC cited a Walmart employee guide used around 2017 that said “if you suspect fraud, complete the transaction” and then report the issue both to MoneyGram and to Walmart’s headquarters, even though the retailer knew customers would likely be unable to recoup the funds.
“Walmart continued this practice despite being told by MoneyGram,” the FTC said, “that it expected Walmart and its employees not to pay out money transfers to suspected fraudsters.”
Walmart said in its blog post that the FTC’s lawsuit “tries to shift the blame to Walmart for what it has already said were another company’s failures.”
“The FTC’s complaint distorts the facts and the law to try and hold Walmart responsible for a miniscule amount of reported fraud, even though we had an extensive program to try to stop such fraud, and continuously improve our anti-fraud efforts to this day,” Walmart said.
