Oregon Department of Justice

Attorney General Hardy Myers Responds To Concerns About Wire Transfer Services By Joining 43 States And District Of Columbia In An Agreement With MoneyGram

Company to fund $1.1 million national consumer awareness program.

Attorney General Hardy Myers today announced that MoneyGram Payment Systems, Inc. (MoneyGram) of Minneapolis, Minnesota has signed an Assurance of Voluntary Compliance (AVC) in response to concerns about fraudulent telemarketers illegally using the company's wire transfer services. Oregon joined 43 other states and the District of Columbia in the settlement agreement filed today. A similar agreement was signed by Western Union (WU) in 2005.

Under the agreement, MoneyGram, among other things, will fund a $1.1 million national consumer awareness program. As in the Western Union settlement, MoneyGram also agreed to include prominent consumer warnings on the forms used by most consumers to wire money.

MoneyGram offers money transfer services by wire at over 25,000 locations in the United States and over 100,000 locations around the world, including grocery stores, gas stations and other retail businesses.

"We are extremely concerned about scammers use of wire transfer services in our state because in 2007 alone, residents filed 825 complaints about International Money Transfer Schemes with hundreds of thousands of dollars being lost by Oregonians," Myers explained. "We must do all that is possible to find innovative ways to reduce these money transfer schemes, which now rank number three on our Top Ten Consumer Complaint List."

The problem addressed by the AVC is the high number of "fraud-induced transfers"—that is, money wired by consumers to fraudulent telemarketers and other scam artists. For example, many telemarketers from other countries target the elderly by telling them they have won money or prizes but must pay foreign "duty" or taxes in order to claim the winnings. The victims are then directed to send the money by wire, because wire transfers are fast, there are transfer agents in most communities, and funds can be picked up in multiple locations.

The problem of fraud-induced transfers is substantial. In 2003, a survey by seven states of transfers over $300 to Canada by another major money transfer company estimated that over 29 percent of those transfers were fraud-induced, resulting in consumer losses in 2002 of approximately $113 million nationally.

Among the terms of the AVC agreed to by MoneyGram are:

• Prominent warnings to consumers of the dangers of fraud-induced wire transfers must appear in English and Spanish on the front page of MoneyGram's Send Form, and comparable warnings are required for telephone and Web transfers. The warning is to occupy at least 40 percent of the area of the Send Form's front page.
• MoneyGram will pay $1.1 million for a national consumer education program on how to avoid fraud-induced transfers, to be overseen by the AARP Foundation.
• MoneyGram will continue its current policy of reimbursing the amount of any transfer to a consumer who requests, prior to pickup, that the transfer be stopped, and also reimbursing transfer fees if the consumer reasonably claims that the transfer was fraud-induced.
• MoneyGram will send prominent anti-fraud messages to its agents electronically every month or whenever a proposed transfer exceeds a certain amount, revise and enhance the company's agent anti-fraud training programs, and provide special training to agents with elevated fraud levels at their locations.
• MoneyGram will take appropriate action to suspend or terminate agent locations that are involved in fraud or that do not take reasonable steps to reduce fraud.
• MoneyGram will block wire transfers from specific consumers or to specific recipients when the company receives information from a state that there are good faith grounds to believe that fraud will occur, until such time as the consumer is counseled on fraud and requests resumption of the transfer.
• MoneyGram will ensure that money transfers sent from the United States can only be picked up in the country designated by the sender, with a potential extension of this policy to the state or provincial level if the pickup of fraud-induced transfers in states or provinces to which consumers do not intend to send money becomes a significant problem in the future.
• MoneyGram will pay $150,000 to be shared among the negotiating states of Arkansas, Illinois, Massachusetts, New Jersey, North Carolina, Ohio, Texas, Vermont and Washington.

Myers noted the importance of enlisting "third parties" like MoneyGram and WU in the campaign against consumer fraud. "We need to make it harder for con artists to utilize traditional methods of transferring money," Myers said. "Agreements such as these with model fraud warnings, consumer education programs, and enhanced training for money transfer agents-are steps in the right direction."

Consumers wanting information on this agreement and consumer protection in general may contact the Attorney General's consumer hotline at (503) 378-4320 (Salem area only), (503) 229-5576 (Portland area only) or toll-free at 1-877-877-9392. DOJ is online at www.doj.state.or.us.