Earlier this week we told you the story of unfortunate Walmart MoneyCard (an Accredited Partner) holders who were dismayed to discover that somebody – presumably a hacker in New York City – had managed to drain the money out of their accounts and spend it at a New York-area Target store.
As of this writing, none of these cases have been resolved; the best anybody’s heard is, “They say I can file a claim but it's going to take probably 45 days” to get their money refunded.
Is there any way these customers can get a speedier resolution for their problems? Unfortunately for the cheated MoneyCard holders, it looks like the answer is, “Not unless Walmart chooses to expedite the process.” The MoneyCard is a reloadable prepaid card, which means cardholders don’t enjoy the level of anti-fraud protection that credit card or even debit card users can take for granted.
What's the difference?
What’s the difference between a credit, debit or prepaid money card, anyway? They all look pretty much the same: little plastic rectangles with raised account numbers and (usually) a VISA or MasterCard logo on them. But credit, debt and prepaid cards are entirely different entities whose users are covered by completely different levels of fraud protection.
Credit card. When you pay for something with a credit card, you’re basically borrowing money from the credit card company: Visa or MasterCard pays the merchant up front, and you pay them back at the end of the month. So if you later have a dispute with the merchant, the credit card company will fight on your side, up to a point anyway.
Debit card. By contrast, when you pay with a debit card you’re making a real-time withdrawal from your own bank account. Settling a debit-card dispute with a merchant is thus more difficult because even if you win, that money’s still absent from your bank account and you must still pry it loose from the merchant. Still, in cases of loss, fraud or identity theft, there are laws limiting your level of liability provided you report the matter to your bank within prescribed time limits.
Prepaid card. Prepaid cards, like the Walmart MoneyCard (an Accredited Partner), are similar to debit cards except that they’re not tied to any bank account you have; instead, you prepay money into them, then spend it as you go. What does this mean for defrauded MoneyCard holders?
Walmart response: Silence
Walmart has not responded to our emails, so we posed the question to Susan Grant, the Director of Consumer Protection at the Consumer Federation of America.
Grant confirmed that, “General purpose prepaid cards are riskier than credit cards or debit cards because they lack legal dispute rights for errors and unauthorized use – they are the equivalent of cash [….] consumers who use them are second-class citizens when it comes to protection against fraud.”
Walmart does have anti-fraud protection policies attached to its MoneyCard system; however, it is a voluntary policy, not a legally mandated one. Grant told us, “Prepaid payroll cards are regulated by Regulation E; general purpose prepaid cards, which can also have wages deposited to them if the employee initiates it, are not. If someone hacks into your general-purpose prepaid card, or you lose it, you are not legally protected.”
That said, after checking Walmart’s MoneyCard policy, Grant noted that “the voluntary policy for this card appears to be similar to the protections afforded by Reg E, which provide that the issuer has up to ten days to credit the account from when you report the error or unauthorized withdrawal (if it needs more time to investigate, it still has to at least provisionally credit the account).”
Walmart’s cardholder policy says this:
“Tell us AT ONCE if you believe your Card or PIN has been lost or stolen. Calling is the best way of notifying us. You will not lose any part of the money on your Card based on unauthorized use if you have exercised reasonable care in safeguarding your Card and PIN from risk of loss or theft. However, if these conditions are NOT met, you could lose the lesser of $50 or the amount of unauthorized use from your Card before you notify us that your Card has been lost or stolen. If you believe your Card or PIN has been lost or stolen, report it online at walmartmoneycard.com or call 1-877-937-4098, or write to Walmart MoneyCard, P.O. Box 1187, Monrovia, CA 91017.”
Assuming Walmart abides by its stated policies, then, the good news is that these MoneyCard holders will eventually get refunds. The bad news is that this could take awhile and in the meantime, the cardholders don’t have their money and can’t pay their bills without it.
What to do
There's not much the Walmart MoneyCard (an Accredited Partner) holders can do right now except to continue pressing for their money and, perhaps, contacting consumer protection agencies in their home state.
But for anyone who is now "unbanked" and using prepaid cards, the best solution may be to join a credit union. Unlike banks and the Walmarts of the world, credit unions are non-profit organizations owned by their depositors. Their fees are generally much lower than banks and most credit unions offer free checking and debit cards. They also offer credit cards, car loans and other types of credit at rates generally much lower than banks.
In the past, credit unions could only sign up members who were part of a tightly-defined group -- employees of a city, members of the military, employees of a corporation. But the rules have been relaxed and many credit unions now require only that you live or work in the area they serve.
Perhaps their biggest advantage for many consumers is that credit unions are relatively small. Instead of being part of a huge multinational financial services group, they tend to have just a few thousand members and only a handful of offices. Yes, this may mean you have to drive a little farther when you need facetime but it also means you will get to talk to a real person who will actually try to help you rather than just sign you up for more services you can't afford.
This also means that when you run into trouble -- fraudulent charges and so forth -- it's likely to be easier to get it straightened out than if you put your trust in someone like Walmart.
To find a credit union near you, check the National Credit Union Administration's locator page.