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08/29/2022

Walmart asks for dismissal of federal money transfer suit

Dan Berthiaume
Senior Editor, Technology
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Walmart is stepping up its efforts to counter Federal Trade Commission allegations that it allowed scammers to defraud consumers via its money transfer services.

In a brief statement on its corporate blog, Walmart publicly asked for federal court dismissal of a Federal Trade Commission (FTC) lawsuit accusing the retail giant of looking the other way while scammers hijacked its money transfer business.

The FTC’s lawsuit is an egregious instance of agency overreach. The FTC is trying to hold Walmart liable for the criminal actions of completely unrelated third-party fraudsters, in spite of Walmart’s extensive efforts to prevent those very fraudsters from defrauding our customers, and despite the FTC’s lack of constitutional or statutory authority to bring the lawsuit. Walmart is now—and always has been—dedicated to its customers, and shares the FTC’s goal of protecting customers from fraudsters,” Walmart said in the statement.

According to the Associated Press, Walmart filed a 41-page document in the U.S. District Court for the Northern District of Illinois Eastern Division asking for dismissal of the FTC’s civil suit. Walmart’s reasons for the request reportedly include the FTC lacking “constitutionally valid authority to sue for money or injunctive relief,” and the agency unfairly holding Walmart liable for the actions of outside third parties despite its efforts to prevent scams in its money transfer service.

FTC alleges Walmart has allowed money transfer scams

In late June, the FTC formally accused Walmart of looking the other way while scammers hijacked its money transfer business. The FTC vote to file the civil penalty complaint was 3-2.

In an official blog post, the FTC said that Walmart turned a “blind eye” while criminals “fleeced consumers out of hundreds of millions of dollars” as a result of failure to properly secure the money transfer services offered at Walmart stores.

[Read more: FTC sues Walmart for alleged money transfer fraud]

In its lawsuit, filed in the U.S. District Court for the Northern District of Illinois, the FTC said Walmart did not properly train its employees, failed to warn customers, and used procedures that allowed fraudsters to cash out at its stores. The FTC is asking for Walmart to return money to consumers and to face civil penalties for these violations.

Based on information from fraud databases maintained by MoneyGram, Western Union and Ria, from 2013 to 2018, the FTC alleges that 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 responds to FTC claims
In a lengthy corporate blog post, Walmart denied the FTC’s allegations and accused the agency of blaming it for illegal actions taken by third parties. Walmart says it has saved consumers—including the unbanked and underbanked— an estimated $6 billion in fees by bringing “important competition” to the money transfer industry.

In addition, Walmart said it “routinely works” with law enforcement and government agencies to stop fraud and other crime. Walmart also accused FTC chair Lina Khan of refusing it the due process of hearing directly from the company, and filing the suit after the Department of Justice refused to take this case to court. Walmart said at the time it would defend against this lawsuit “aggressively.”

Walmart began offering money transfer services in 2014. More recent financial services developments include the 2021 launch of a partnership with Western Union, as well as backing a fintech startup in collaboration with Ribbit Capital.