Walmart class action over fraudulent money transfers gets partial dismissal

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Update:

• A federal judge in Illinois partially dismissed claims from the Federal Trade Commission (FTC) that Walmart turned a blind eye to more than $200 million in fraudulent money transfers. 
• U.S. District Judge Manish S. Shah, while tossing claims under the agency’s Telemarketing Sales Rule, ruled the FTC failed to sufficiently prove Walmart was aware fraudsters used its money-transferring services to break the law. 
• Judge Shah acknowledged Walmart had, at times, encouraged its workers to process transactions that were suspected to be fraudulent but determined that more specific examples needed to be shown.
• The FTC will still be able to pursue claims against Walmart under Section 5 of the FTC Act.
• The agency argues Walmart violated the section by allegedly failing to warn its customers about the innate risks that come with wire transfers and not providing info about what types of scams can occur.

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Walmart money transfer services fraud lawsuit overview: 

• Who: The Federal Trade Commission has filed a complaint against Walmart Inc. 
• Why: The FTC claims Walmart has failed to take steps to prevent its money transfer service from being taken advantage of and used by fraudsters. 
• Where: The lawsuit was filed in Illinois federal court. 

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(June 30, 2022)

The Federal Trade Commission has filed a complaint against Walmart for allegedly failing to adopt policies and practices which would help detect and prevent money transfer services fraud on its service. 

The FTC claims Walmart is “well aware” that its money transfer service is used by fraudsters to “induce people” into sending money to “domestic and international fraud rings.” 

Walmart’s money transfer service was used to facilitate at least $197 million worth of fraud between January 2013 and December 2018, the Walmart lawsuit alleges. 

“In some cases, Walmart’s practices have even made it easier for fraudsters to collect fraud-induced money transfers at a Walmart store,” the agency said in its Walmart lawsuit. 

The FTC argues that Walmart has for years maintained a policy and practice not to deny payouts to individuals at its store that it suspects are fraudsters. 

Instead, the FTC claims Walmart’s policy is simply to have the transactions completed by a company employee. 

FTC claims Walmart has failed to end cash-to-cash money transfers

The FTC also argues that Walmart declined to take the “appropriate steps” to eliminate cash-to-cash money transfers at its locations after the practice became illegal in June 2016. 

“As a result of Walmart’s failure to take appropriate steps to mitigate the problem, consumers have lost substantial sums to frauds through money transfers effected at Walmart,” the FTC says. 

Financial services offered by Walmart include money transfers, check cashing, bill payment, money orders, gift cards, and reloadable debit cards, among other things, according to the Walmart lawsuit. 

Walmart’s financial services department “generates significant retail sales” for the company on account of its role in “driving customer traffic” to the company’s physical locations, according to the FTC. 

The FTC claims Walmart’s alleged inaction puts it in violation of the Federal Trade Commission Act and the Telemarketing Act. It is seeking permanent injunctive relief along with monetary civil penalties. 

Walmart has initiated several recalls and faced a number of class action lawsuits in recent months, including an April complaint filed by a consumer alleging the company falsely markets Lidocaine patches as being stronger and longer lasting than they truly are. 

Have you been the victim of fraud on Walmart’s money transfer service? Let us know in the comments! 

The FTC is represented in house by Karen D. Dodge, Purba Mukerjee and Matthew G. Schiltz.  

The Walmart money transfer services fraud lawsuit is Federal Trade Commission v. Walmart Inc., Case No. 1:22-cv-03372, in the U.S. District Court for the Northern District of Illinois.

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