The U.S. Federal Trade Commission (FTC) said Tuesday (June 28) that it sued Walmart Inc., alleging the retailer allowed scam artists to access its money transfer services, resulting in fraud that cost consumers “tens of millions of dollars” each year.
The complaint said that for years Walmart did not adequately train employees, failed to warn customers and used procedures that allowed fraudsters to cash out at its stores.
“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.”
The FTC 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.
The complaint said that 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.
Walmart said the complaint is a flawed and legally baseless civil suit brought by a narrowly divided FTC. Walmart said the FTC chairman refused Walmart the due process of hearing directly from the company, and the Department of Justice also declined to take the case to court.
Attorneys for Walmart argue the fraud stems from a system failure at MoneyGram during an 18-month period when it was under a consent order by the FTC.
“Now the agency appears poised to attempt to shift blame to Walmart for the conduct of third-party fraudsters engaged in money transfers, including MoneyGram, who was subject to federal government supervision through a monitor at the time,” Walmart attorneys stated.
“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,” the retail giant said in a prepared statement on Tuesday.
The FTC is asking the court to order Walmart to return lost funds to consumers and to pay civil penalties.