[Senate Hearing 113-907]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 113-907

                  PRIVATE INDUSTRY'S ROLE IN STEMMING
                        THE TIDE OF PHONE SCAMS

=======================================================================

                                HEARING

                               BEFORE THE

                       SPECIAL COMMITTEE ON AGING

                          UNITED STATES SENATE

                    ONE HUNDRED THIRTEENTH CONGRESS


                             SECOND SESSION

                               __________

                             WASHINGTON, DC

                               __________

                      WEDNESDAY, NOVEMBER 19, 2014

                               __________

                           Serial No. 113-32

         Printed for the use of the Special Committee on Aging
         
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        Available via the World Wide Web: http://www.govinfo.gov
        
                               __________

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
46-919                    WASHINGTON : 2022                     
          
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                       SPECIAL COMMITTEE ON AGING

                     BILL NELSON, Florida, Chairman

ROBERT P. CASEY JR., Pennsylvania    SUSAN M. COLLINS, Maine
CLAIRE McCASKILL, Missouri           BOB CORKER, Tennessee
SHELDON WHITEHOUSE, Rhode Island     ORRIN HATCH, Utah
KIRSTEN E. GILLIBRAND, New York      MARK KIRK, Illinois
JOE MANCHIN III, West Virginia       DEAN HELLER, Nevada
RICHARD BLUMENTHAL, Connecticut      JEFF FLAKE, Arizona
TAMMY BALDWIN, Wisconsin             KELLY AYOTTE, New Hampshire
JOE DONNELLY Indiana                 TIM SCOTT, South Carolina
ELIZABETH WARREN, Massachusetts      TED CRUZ, Texas
JOHN E. WALSH, Montana
                              ----------                              
                  Kim Lipsky, Majority Staff Director
               Priscilla Hanley, Minority Staff Director
                                
                                
                               CONTENTS

                              ----------                              

                                                                   Page

Opening Statement of Senator Bill Nelson, Chairman...............     1
Opening Statement of Senator Susan M. Collins, Ranking Member....     3

                                APPENDIX
                           Panel of Witnesses

Steven W. Streit, Chief Executive Officer, Green Dot Corporation.     4
R.B. ``Skeet'' Rolling, Chief Operating Officer, InComm..........     6
William Y. Tauscher, Chief Executive Officer and Chairman of the 
  Board, Blackhawk Network Holdings, Inc.........................     8
Lisa LaBruno, Senior Vice President, Retail Operations, Retail 
  Industry Leaders Association...................................     9

                      Prepared Witness Statements

Steven W. Streit, Chief Executive Officer, Green Dot Corporation.    27
R.B. ``Skeet'' Rolling, Chief Operating Officer, InComm..........    30
William Y. Tauscher, Chief Executive Officer and Chairman of the 
  Board, Blackhawk Network Holdings, Inc.........................    33
Lisa LaBruno, Senior Vice President, Retail Operations, Retail 
  Industry Leaders Association...................................    38

                       Statements for the Record

Senator Susan M. Collins, Statement..............................    43
CFPB news article, November 13, 2014.............................    44

 
                  PRIVATE INDUSTRY'S ROLE IN STEMMING
                        THE TIDE OF PHONE SCAMS

                              ----------                              


                      WEDNESDAY, NOVEMBER 19, 2014

                                       U.S. Senate,
                                Special Committee on Aging,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 2:00 p.m., Room 
562, Dirksen Senate Office Building, Hon. Bill Nelson, Chairman 
of the Committee, presiding.
    Present: Senators Nelson, McCaskill, Donnelly, Collins, and 
Scott.

                 OPENING STATEMENT OF SENATOR 
                     BILL NELSON, CHAIRMAN

    The Chairman. Good afternoon.
    Senator Collins and I have run this committee in a 
bipartisan way and we decided early on that one of the things 
we wanted to do in looking out for the interest of senior 
citizens was to go after the people who are perpetrating fraud 
on them. We first started out focusing on the Jamaican phone 
scams. Then, we moved on to tax identity theft, Social Security 
fraud, and then some very despicable grandparent scams. We set 
up a fraud hotline, where we have received thousands of calls 
for help, and for the record, that number is 855-303-9470.
    Fraud is going to continue, not only against seniors, but 
against all people, but we started chipping away at it with 
regard to seniors. After the Jamaican phone scam hearing, new 
legislation was passed and signed into law in Jamaica and it 
spoke to the specific crimes that were being committed against 
our seniors, where these syndicates down there would call 
seniors and basically seduce them into sending money out of 
their bank accounts. The Jamaican authorities have made 100 
arrests, but there have been only a handful of convictions, and 
we still are pressing for extradition. You extradite one of 
them here and let an aggressive U.S. Attorney go after him and 
put him away in the slammer and the rest of the fraudsters down 
in Jamaica will get the message.
    We have pushed agencies to coordinate their efforts to go 
after people taking advantage of our seniors. We have 
encouraged law enforcement to actually prosecute the 
lawbreakers and, therefore, to scare away the copycats, and, we 
have pressed private industry to be good corporate citizens.
    Today, Senator Donnelly and I introduced legislation to 
make it easier for seniors to actually know who is calling them 
and to give them tools to protect themselves from these 
fraudsters. This legislation which we have just put out as part 
of the educational process, called the Phone Scam Prevention 
Act, I encourage our members to take a look at it.
    Now, the most common scam begins with a fraudster placing--
and ``fraudster,'' by the way, is too nice a term--thugs, 
criminals. The most common scam begins with them placing phone 
calls to unsuspecting individuals, informing them that they 
have won a foreign lottery, or that a grandchild has been 
injured or arrested, and then these thugs tell their potential 
victims that they must make an advance payment to cover taxes 
and other fees before their lottery winnings can be released, 
or that the money is needed to help the grandchild who is now 
hurt or in jail.
    This criminal thug instructs the senior to go to a retail 
store to purchase a reload card, and the victim will pay the 
cashier the amount of the money that they wish to load onto the 
card, and as soon as the transaction is complete, then that 
reload card carries that value. Each of the cards--and this is 
just one example--they have a PIN number, and they scratch off 
that PIN number--it is unique to the amount of money put on 
that card--and it is used, that PIN number, to apply the card's 
fund to some other account, like a prepaid debit card account, 
so, when the victim provides the PIN number to the scammer, the 
thug can immediately apply that money that has been loaded onto 
that reload card to the debit card that is held by the thug.
    Now, recognizing the fraud associated with these kind of 
products, many of the companies have acted without regulatory 
or legislative action. Two of the debit card companies here 
today, Green Dot and InComm, have announced plans to drop these 
products that have been used so effectively by the thugs, and, 
even though these products can serve very legitimate purposes, 
these two companies have decided to do the right thing and we 
certainly applaud you all about that and we are looking forward 
to hearing from you.
    The third major debit card company, Blackhawk, has also 
tightened up its security measures on a similar reloadable 
card. This company have cited this committee's work in fighting 
fraud as one of the reasons why you have made the changes, and 
we are looking forward to hearing about those changes and what 
is the security of the card that you continue to promote.
    What Susan and I have done in this committee, we tried to 
make a difference in the lives of a few of our seniors, and we 
are going to hear today from private industry, the debit card 
companies, and the retailers about why they have taken the 
actions they have taken.
    Now, let me say that in an hour, we are going to have a 
series of five votes, so we are going to try to compress this 
thing in, because we would not in any way have you wait in 
recess until we could get back from the votes. That would just 
take too long in the course of conducting five votes.
    Senator Collins.
                 OPENING STATEMENT OF SENATOR 
                SUSAN M. COLLINS, RANKING MEMBER

    Senator Collins. Thank you very much, Mr. Chairman.
    I would ask unanimous consent that my entire statement be 
printed in the record because I am going to shorten my remarks 
in light of the votes so we have more time for our witnesses.
    Before we hear from our witnesses, however, I want to take 
this opportunity to personally thank you for your leadership of 
this committee, which has been tremendous, and for the 
unfailing courtesy that you have shown to me, as your Ranking 
Member, to the other members of this committee, and to those 
who have testified before us. That has truly been a hallmark of 
your tenure as the Chairman, and our achievements as a 
committee trace directly to the bipartisan, indeed, nonpartisan 
tone that you set and the spirit of comity and cooperation that 
have prevailed as a result, so, I thank you for that great 
leadership.
    I also want to commend your staff, as well as my own staff, 
and thank them for their hard work during the past two years. 
It is, as you mentioned, fitting that the last hearing that you 
and I will lead as the Chairman and Ranking Member examines 
once again the problem of scams targeting American seniors and 
how we can stop them. This incredibly important topic has 
rightfully been the focus of much of our hearings during the 
past two years. Indeed, we have held eight hearings on frauds 
and other scams targeting our seniors, and as in the case of 
the Jamaican government changing its laws, as you mentioned, I 
believe that we have made a real difference.
    One common theme that has emerged from these hearings is 
the role played by prepaid debit cards. It is difficult to say 
exactly how much money Americans lose through scams that 
involve these prepaid debit cards since many victims do not 
report their losses. My staff was telling me that the FTC ranks 
the State of Maine 42nd in the reporting of frauds, and I think 
that reflects the nature of the seniors in my State rather than 
the fact that there is a lower incidence of fraud. Indeed, the 
Jamaican lottery scam particularly targeted northern New 
England.
    The FTC does estimate that Americans report losing nearly 
$43 million through prepaid debit card scams last year alone. 
Because these cards are widely available and convenient, and 
because the money transferred using them is untraceable, these 
cards have become the monetary tool of choice for scammers. 
This is especially true, as the Chairman indicated, for cards 
that can be reloaded with money, which have a unique PIN that 
customers can use to transfer funds.
    In a typical scam, the con artist will pressure the victim 
into purchasing reloadable cards, putting money on the card, 
and then sharing the card's PIN number with the scammer. Thus 
armed with the PIN, the scammer can transfer the money to his 
or her own prepaid debit card account and then access those 
funds from an ATM, through PayPal, or even by buying and 
reselling consumer goods on the Internet.
    Now, I want to emphasize that there are many legitimate 
reasons why consumers would want to use prepaid debit cards. 
They are especially important to lower-income consumers who may 
not have access to traditional banking services. Still, it is 
important that we understand what can be done by card providers 
and retailers to make it more difficult for criminals and con 
artists to use these cards to advance their nefarious schemes.
    The witnesses whom we will hear from today will describe 
the actions that they are taking to push back against these 
scammers. Some retailers have also joined the battle by 
training their sales clerks on what they can do to spot 
customers who are engaging in suspicious transactions with 
prepaid cards. I very much appreciate the willingness of the 
members of this panel to come forward and give us your 
insights.
    Again, Mr. Chairman, thank you for your extraordinary 
leadership. Although we will be serving in different capacities 
in the next Congress, I am confident that we are going to 
continue to be partners when it comes to working together to 
protect America's seniors. Thank you.
    The Chairman. Senator Collins will be the Chair of this 
committee next year, and because of her extraordinary 
leadership, this committee will be in great hands. I certainly 
want to echo the kudos that you gave to the staff, and this is 
an example, often overlooked, where the staff works together in 
a bipartisan way.
    Now, if the members of the committee will indulge me, since 
we are racing the clock because of the votes, I am going to 
defer my questions and I will turn to you all first, but let us 
get right to our panel.
    First, Steve Streit. He is the CEO of Green Dot 
Corporation. Then Skeet Rolling, the Chief Operating Officer of 
InComm. Next is William Tauscher, the CEO and Chairman for 
Blackhawk Network Holdings, and then Lisa LaBruno, Senior Vice 
President of Retail Operations at the Retail Industry Leaders 
Association.
    Mr. Streit, if you could keep your comments limited to five 
minutes, we will go through and have everyone and then we will 
get into the questions, and Senator Collins will be the first 
to question.

             STATEMENT OF STEVEN W. STREIT, CHIEF 
            EXECUTIVE OFFICER, GREEN DOT CORPORATION

    Mr. Streit. Thank you, Senator. I will save time by not 
introducing myself and I will live edit as we go for the 
purpose of time.
    The Chairman. Please.
    Mr. Streit. Green Dot has been a leader in developing 
techniques to help prevent telephone scams, and so it is my 
pleasure to join you all today and deepen our ongoing 
partnership with your important committee in helping to protect 
seniors from falling prey to these types of phone scams.
    Green Dot is a 15-year-old entrepreneurial start-up that 
invented what is known today as the prepaid debit card 
industry. Prepaid debit cards have become popular bank account 
products for millions of Americans because they are convenient, 
easy to use, easy to get, and, generally, much lower in cost 
compared to traditional bank checking accounts or credit cards, 
and, by the way, these cards are not anonymous and, in fact, 
are fully PATRIOT Act compliant.
    While Green Dot is the largest prepaid debit card provider 
in the United States, many of the nation's largest banks and 
financial services companies now also sell prepaid debit cards 
to consumers as the product has become increasingly more 
popular and more mainstream.
    Around 2003, Green Dot needed to find an easy way for 
customers to reload their prepaid card with cash at many 
different retailers from coast to coast. The challenge back 
then was that the retailer point-of-sale systems--those are the 
cash register systems--were fairly old, inflexible, and 
inconsistent from retailer to retailer, so, Green Dot created a 
product called the MoneyPak. The MoneyPak was designed to allow 
prepaid card customers to add cash to their prepaid card at 
many retail stores without the retailer having to modify their 
existing point-of-sale equipment.
    The innovation behind the MoneyPak was the PIN method of 
reloading, and this is where the customer, as you pointed out, 
Senator, buys a PIN, which is a multi-digit secret code number, 
for a certain amount of money and then goes online or 
telephones a computer to have the value of that PIN applied to 
their prepaid card account. The success of the PIN method 
allowed us to sell the MoneyPak product at thousands of 
retailers, which then led to the creation of the Green Dot 
Reload Network, which offers users of many different brands of 
prepaid cards the ability to add cash at any Green Dot retail 
location.
    Today, the Green Dot Network serves customers from nearly 
200 prepaid card programs who can add cash to their prepaid 
cards at nearly 100,000 retailers from coast to coast. In 2013, 
the Green Dot Network processed more than 40 million reload 
transactions on behalf of millions of Americans who rely on 
their prepaid cards as their FDIC bank account of choice.
    While the PIN method of reloading facilitates the safe 
reloading of cash on behalf of millions of honest customers 
each year, it has, unfortunately, also become susceptible to 
exploitation by scammers who target seniors with confidence 
scams. Such scams are designed to convince a senior, as you 
pointed out, that they have won a prize or a car or some 
similar enticement and that the way for the senior to collect 
the prize is to buy a MoneyPak or a similar PIN product sold by 
other companies, many of which are at this table today, and 
then provide that secret PIN number associated with that 
MoneyPak to the scammer.
    This method is called--the fraud is called victim-assisted 
fraud because a scam can only happen when a willing victim 
purposely cooperates with a con artist, buys the MoneyPak, 
ignores the warnings on the package not to tell anyone their 
PIN number, and then they give away their PIN and their name 
and other personal information anyway to the con artist because 
the victim truly believes the con. In other words, the con 
artist is so convincing on the telephone that they actively 
facilitate the scam, so, the victim wants to give their money 
to the con artist, thinking it is legitimate, and because that 
victim wants to give away the money, it has been very, very 
hard for us to stop, despite many different techniques that we 
have shared with you over the years.
    Given the victim-assisted nature of the fraud and our 
inability to completely eradicate the nefarious use of our 
MoneyPak PIN product, Green Dot has decided to discontinue the 
PIN method of reloading a card altogether. We have moved fully 
to a more modern and more fraud-resistant card swipe reload 
process, and the swipe reload process is more fraud resistant 
because swipe reloading--just as the name implies, you take 
your card and you swipe it at the register--requires the actual 
card holder to be present in the store with their card in their 
possession in order to facilitate the reload, so, without the 
PIN, the scammer will have no method of instructing the senior 
to buy a product and no method of redeeming any associated PIN 
number, and we think that will kill the fraud on our products.
    The PIN product has already been removed from our largest 
retailers, including Walmart and many other Green Dot 
retailers, and will be completely unavailable in all Green Dot 
retailers by the end of the first quarter of 2015, in just a 
few short months. Today, the vast majority of Green Dot reloads 
are already performed using the swipe method of reloading and 
not a PIN number.
    Green Dot is proud of our efforts to protect our nation's 
seniors from scams, and we are certainly ready and willing to 
continue to work with law enforcement, this committee, and 
others towards the protection of our nation's most vulnerable 
customers.
    After we all speak, I will be available, of course, to 
answer any questions you may have.
    Thank you.
    The Chairman. Mr. Rolling.

             STATEMENT OF R.B. ``SKEET'' ROLLING, 
                CHIEF OPERATING OFFICER, INCOMM

    Mr. Rolling. Thank you. Chairman Nelson, Ranking Member 
Collins, and members of the committee, thank you for holding 
this hearing on the prepaid industry's role in mitigating 
elderly-targeted fraud and for inviting InComm to participate. 
I am pleased to share what we are doing to eliminate the 
ability of fraudsters to take advantage of seniors through what 
we refer to as victim-assisted fraud.
    My name is Skeet Rolling and I am the Chief Operating 
Officer for ITC Financial Licenses, which is an affiliate of 
InComm that offers numerous financial services products, 
including the Vanilla Reload Network. I have been investigating 
and working to prevent fraud for over 30 years. I started my 
career as a law enforcement officer. I then helped manage 
credit and debit card operations for ten years for what is now 
Synovus Financial Corporation, after which I spent 11 years 
leading the development for fraud and risk management products 
for TSYS, one of the world's largest payment processors. I have 
been with ITC Financial for the last 11 years, leading InComm's 
compliance, fraud, and anti-money laundering teams. I am also a 
member of the Executive Board of the Columbus, Georgia, Better 
Business Bureau.
    Founded in 1992 and headquartered in Atlanta, Georgia, 
InComm is a leading global distributor and technology provider 
of payment products and solutions with over 1,700 employees 
worldwide. We are registered with FinCEN as a money service 
business and we are fully licensed to--as a money transmitter 
authorized to offer our financial products in all 50 States as 
well as three Territories. We are subject to the oversight of 
State banking regulators as well as to the CFPB at the Federal 
level.
    We are proud to offer the Vanilla Reload Network. Consumers 
rely on Vanilla Reload for an easy, safe, and convenient way to 
add funds to their card accounts. The vast majority of 
consumers, 99.9 percent, use our product legitimately and in 
the manner intended.
    One of the biggest fraud-related issues our industry faces 
is the mitigation and prevention of victim-assisted fraud. This 
fraud is difficult for industry participants to detect and 
eliminate because the scams rely on legitimate consumers being 
deceived into using a reload network product to send money to a 
criminal whom they believe to be either a family member or a 
trusted individual. These criminals are ruthless, often preying 
on the elderly, and they continue to find new ways to scam 
victims.
    Fraudsters have recently revived the grandparent scam, as 
you referenced, Senator, posing as a relative of the victim who 
is in dire need of financial assistance. Even when the retail 
clerk warns the victim, and even when warnings are placed on 
the products, victims are so convinced by the fraudster's story 
that they often ignore the warnings and fall victims.
    InComm takes its responsibility to consumers very 
seriously. We have over 60 employees dedicated to compliance, 
anti-money laundering, and fraud prevention. We have a robust 
suspicious activity policy with protocols in place to identify 
fraudulent activity and we take actions to prevent fraud where 
suspected. We have invested significant resources to develop 
and institute best practices to warn consumers about victim-
assisted fraud and to monitor, spot, and stop this type of 
fraud. We have met with the IRS, with the Secret Service, with 
the CFPB, with State regulators, and representatives of this 
committee to discuss these best practices.
    We spend significant time and resources training retailers 
which sell our products to recognize and warn seniors about 
fraud. We have created a fraud laboratory in our business to 
test our own products against the latest criminal techniques. 
We eliminated ATM access on our GPR cards in countries where we 
observed large amounts of fraud in order to prevent the 
withdrawal of stolen funds in those countries, with Jamaica 
being one of those. We implemented program restrictions, such 
as cash access, to make our products more difficult for 
fraudsters to use.
    Further, as a leading innovator in the gift card and 
prepaid market, it is technology that is our most important 
tool in mitigating fraud. InComm has developed proprietary 
swipe reload technology which allows a customer to swipe that 
GPR card at the point of sale to facilitate the reload 
transaction. This process not only is more convenient for 
consumers, but it also eliminates victim-assisted fraud by 
preventing cash from being transferred via the use of a PIN. By 
offering card-present reloads, only the person holding that 
card can load funds to it.
    That is why on October 24, we announced that we were 
expanding our swipe reload technology and that we will be 
retiring the Vanilla Reload PIN packs from our stores by March 
31, 2015.
    Thank you again for your efforts in calling attention to 
this serious problem and for organizing this hearing to allow 
prepaid industry officials to discuss our proactive efforts to 
eliminate victim-assisted fraud. I look forward to answering 
any questions you may have. Thank you.
    The Chairman. Mr. Tauscher.

       STATEMENT OF WILLIAM Y. TAUSCHER, CHIEF EXECUTIVE

               OFFICER AND CHAIRMAN OF THE BOARD,

                BLACKHAWK NETWORK HOLDINGS, INC.

    Mr. Tauscher. Chairman Nelson, Ranking Member Collins, 
distinguished members of the committee, thank you for the 
opportunity to testify today. I look forward to describing 
Blackhawk's aggressive approach to preventing victim-assisted 
fraud against seniors and other consumers. Blackhawk is 
grateful for the committee's leadership on this important 
issue.
    Blackhawk is a leading payment network, offering a broad 
range of prepaid products and payment services in the U.S. and 
21 other countries. We support the physical and digital 
distribution of a variety of prepaid products, including gift 
cards and general purpose reloadable, GPR, cards. The Reloadit 
pack used in our GPR program is sold in over 10,000 locations, 
mostly grocery stores like Safeway, Giant Eagle, Hannaford, and 
Winn Dixie, as well as convenience stores and specialty stores.
    Blackhawk has been working hard in recent months to 
implement a variety of technologies to combat victim-assisted 
fraud. Our key anti-fraud efforts over the years include 
monitoring GPR card and Reloadit pack activations and 
transactions using sophisticated fraud detection software, 
training retail employees about victim-assisted fraud, ensuring 
consumer awareness of fraud threats, and coordinating with law 
enforcement and regulatory agencies. A detailed discussion of 
our anti-fraud measures is included in my written testimony.
    GPR cards and other prepaid financial service products 
offer value and convenience as a substitute to traditional 
debit cards, credit cards, and bank accounts. Consumers can add 
money to GPR cards by choosing among several different load 
methods. The most common method consumers use is a quick load 
option in which consumers purchase a Reloadit pack or a similar 
product at a store and then reload their GPR card by going 
online or calling a toll-free number to provide a ten-digit PIN 
number found via scratch-off on the back of the Reloadit pack.
    Recently, Blackhawk added a new method for consumers to 
reload GPR products by creating the Reloadit Safe. This allows 
the cardholder to store their funds and decide when they want 
to load funds to their GPR card, and, if they have multiple 
cards, which cards they want to load. This has been an optional 
feature of Reloadit to date. Unlike the quick load option or 
the swipe reload option, the customer is required to set up a 
Reloadit Safe account with an e-mail address, a valid password, 
a unique device identifier, and a separate self-assigned PIN 
different than the scratch-off PIN. This creates a safe that 
will only permit the customer to load money from a specific 
device after a minimum 30-minute delay from the purchase of the 
Reloadit pack. From then on, customers control when their money 
is moved and to which GPR account or accounts they added into 
their safe.
    We are pleased to announce today that by March 2, 2015, 
customers will no longer be able to use the quick load method. 
From then on, the customer will purchase a Reloadit pack, go 
online to their Reloadit Safe, enter the user ID and password 
to open the safe, and enter the ten-digit Reloadit number. The 
safe will verify that the device ID matches the device through 
which the safe was created. This method is essentially the same 
account authentication process used by major financial 
institutions for mobile and online banking applications.
    Further, Blackhawk will enhance the safe to allow us to 
monitor activations and activity based on the specific device, 
such as smart phone, tablet, and computer, that the customer 
uses to link to a safe. Once the device is used to create a 
safe, that device will not be able to create another safe. The 
enhanced safe will allow Blackhawk to intervene in possible 
fraud scenarios before the funds are transferred from a 
Reloadit pack.
    Today, customers can also reload their GPR cards by swiping 
their card at a register and giving the store clerk cash for 
reload, but, only 50 percent of all retail locations in our 
program offer reload on swipe today. We are currently assisting 
many of our retail partners in converting their point-of-sale 
hardware to allow swipe reload. It is a big investment by them, 
and we are pleased to announce that by the end of 2015, all of 
the retail locations in our program who sell these products 
will accept swipe at the register.
    We also work extensively with law enforcement on these 
issues at the local, State, and Federal levels, and we work to 
educate retail partners and consumers about potential fraud 
threats. The results of our extensive effort is less than one 
percent of transactions involving Reloadit packs constitute 
potential fraud. However, we are diligently working to enhance 
fraud protection as we continuously adapt to ever-changing 
threats.
    Thank you again, and I would be welcome to take questions.
    The Chairman. Thank you.
    Ms. LaBruno.

             STATEMENT OF LISA LaBRUNO, SENIOR VICE

              PRESIDENT, RETAIL OPERATIONS, RETAIL

                  INDUSTRY LEADERS ASSOCIATION

    Ms. LaBruno. Thank you, Mr. Chairman. Chairman Nelson, 
Ranking Member Collins, members of the Special Committee on 
Aging, thank you for the opportunity to testify at today's 
hearing regarding the role of the private sector in deterring 
phone scams targeting seniors.
    My name is Lisa LaBruno and I am the Senior Vice President 
of Retail Operations at the Retail Industry Leaders 
Association. By way of background, RILA is the trade 
association of the world's largest and most innovative retail 
companies.
    The issue of senior scams is, unfortunately, a growing 
problem and one that our members take very seriously. I applaud 
the committee for holding today's hearing on this important 
issue, because we know that criminals are persistent and they 
will prey on anyone, including the elderly.
    At the outset, it is important to understand that our 
retail members carry tens of thousands of products in a given 
store and that the vast majority of the time, we do not 
produce, design, or manufacture these items. We rely on the 
expertise of our vendors to create great products that our 
customers want. At the same time, since we are closest to the 
customer, and above all, we value the relationships we have 
with them, we want to make sure, to the extent possible, that 
the products are being used safely, comply with all necessary 
laws and regulations, and most importantly, provide value to 
the customer.
    Today's hearing is focused on so-called reloadable pack 
cards, which are prepaid cards that have grown in popularity 
with our customer base. They provide a valuable service by 
transferring funds easily and affordably between two 
individuals. According to statistics by the providers of these 
reloadable pack cards, over 99 percent of all transactions 
using these cards are for legitimate purposes.
    Unfortunately, these reloadable pack cards also appear to 
be just one of the latest mechanisms for fraudsters to con 
people, including the elderly, out of their money. There is no 
failsafe way that retailers can guarantee that these types of 
scams will never occur using these products. However, more can 
be done by all stakeholders, including law enforcement, card 
providers, and merchants by providing consumer education, 
strengthening safeguards built into these products, and 
partnering with law enforcement to deter criminal activity on 
the front end and arrest and prosecute criminals on the back 
end.
    While retailers are an important player in this process, we 
are only one link in the chain, and so we appreciate when our 
customers, law enforcement, prepaid card vendors, regulators, 
and Congress bring to our attention areas of abuse. As 
responsive companies built on a foundation of trust with our 
customers, we want to see to it that we do our part to minimize 
the fraud that could occur on these transactions.
    Retailers have taken various steps to mitigate the risk of 
seniors falling prey to these scams, including employee 
training, signage, and point-of-sale enhancements. For example, 
many retailers train their staff to identify signs of common 
scams in order to prevent the transaction from proceeding and 
protecting their customers from loss. Many of these reloadable 
products have large warning labels directly on the package 
warning customers about the dangers of giving the PIN to 
unauthorized users.
    Additionally, point-of-sale information can be used to 
educate customers about the dangers of fraudsters. POS 
enhancements have been installed to alert retailers and the 
reloadable card vendor to possible suspicious activity and to 
stop the transaction when certain thresholds are met.
    However, despite our best efforts, unfortunately, people 
can always fall victim to scams of any kind. Recently, Green 
Dot and InComm announced plans to pull their product from store 
shelves by the end of first quarter 2015. We fully expect that 
all RILA members will comply with this deadline, and, we have 
also learned that Blackhawk plans to enhance the security 
aspects of its reloadable pack cards. We look forward to 
learning more.
    To be clear, it is not RILA's role to stand between the 
relationships that merchants have with their vendors, and so we 
look forward to seeing what types of innovative new products 
will come into the marketplace that will satisfy our customers' 
demand for these services while enhancing the security of these 
transactions.
    Finally, we must make sure that law enforcement has all of 
the resources and tools necessary to combat these crimes.
    Thank you, and I look forward to answering your questions.
    The Chairman. Thank you.
    Senator Collins, your questions.
    Senator Collins. Thank you very much, Mr. Chairman.
    Mr. Streit, Mr. Rolling, and Mr. Tauscher, I want to start 
my questions by asking each of you the same question. When a 
senior comes to you and says, I am the victim of a scam in 
which your card was involved, what do you do?
    Mr. Streit. Believe it or not, oftentimes, it is not the 
senior. It is typically the adult----
    Senator Collins. A family member.
    Mr. Streit. Yes. The adult child of a senior says, ``Hey, 
this happened to mom or dad.'' Mom or dad is often heard in the 
background, saying, ``No, it is still real.'' In other words, 
the con is so good that the senior still believes it. They 
would call our call center--we have customer service numbers on 
our packaging and on the website and available elsewhere--and 
they would say, ``Hey, I believe I have been victimized by this 
or that.''
    We ask for the account number of the MoneyPak that they 
have. We research the MoneyPak. These are not anonymous, so, as 
soon as we know the PIN number, we know exactly what card that 
money was loaded to, the address and name and other personal 
information of the alleged fraudster, and if it is our card, we 
block the card, seize the funds, and if there are funds 
remaining, immediately refund it to that family member. The 
individual is then turned over to law enforcement, and we have 
had many, many, many arrests and prosecutions. We have an 
entire investigative division that works with law enforcement 
to do that.
    Oftentimes, a senior just does not believe it is true and 
they will wait months and months and months until somebody 
finally calls, and in that case, we still do all the law 
enforcement work, but the money is typically by that time long 
gone and long spent.
    If it is not one of our cards, because we reload cards for 
over 200 banks and program managers, we immediately call that 
other bank and say, ``Hey, this is a fraud report on one of 
your cards.'' We give them the account number, and then that 
bank would research their customer, block the card, and try to 
do the same thing.
    Senator Collins. Mr. Rolling.
    Mr. Rolling. Thank you for that question. Our response is 
very similar to that of Green Dot. When we take the initial 
report, we gather the details of exactly what has happened, 
follow the money, determine what account received that money, 
and ensure that we block that account as quickly as possible.
    We, too, allow funds to be applied to partner cards, others 
that participate in our reload network. In the event we get a 
report of fraud on one of their accounts, we notify them 
immediately and request that they block that card.
    In terms of caring for the consumer, we encourage that 
consumer to immediately file a police report and make a record 
of what has taken place. Every time money is applied to one of 
our products, it creates an electronic record every time the 
underlying account is used. That underlying account and those 
transactions are very important investigative leads that can be 
followed and arrests can be made in many cases.
    We, too, have made many arrests related to this type of 
activity. We had a very significant arrest in Macon, Georgia, 
that involved 500 charges related to financial transaction card 
fraud, victim-assisted-type fraud, involving the FBI and local 
authorities in Macon, Georgia.
    Senator Collins. Mr. Tauscher.
    Mr. Tauscher. I do not really have any new things to add 
that were not said already. We, essentially, have all the same 
processes, but, I would say a couple of things.
    One of the problems, of course, even though we can trace 
the money and we get law enforcement involved, one of the 
problems is the scammer is moving to get that money as fast as 
he can out of the system, and then the fact that you find the 
card, the money is gone and he is gone, so, the real effort, in 
our view, is to try to figure out how to put as much barriers 
to that happening as you can.
    I am sure the other folks up here are doing the same, but 
we spent lots of time worrying about the frequency and the 
amounts of charges that go on and looking at those in a very 
specific say compared to cardholders and compared to stores 
that are distributing them, and, you can develop patterns that 
can actually cause you to turn off a store, turn off a 
particular activity, and all of that has become very helpful 
over the last year or so as this fraud has developed in 
blocking fraudsters, if you will, because there is a pattern. 
They are, by definition, trying to get more money either out of 
an individual than the individual normally handles, out of the 
store than the store might handle, or into a series of accounts 
in a way that is different than a pattern we have seen, so, 
besides all of the issues that Steve and--were covered here, I 
would just say that this whole idea of using fraud detection 
systems to look for aberrations is a key element of what we try 
to do.
    Senator Collins. Just very quickly, because my time is 
rapidly expiring, for a stolen bank credit or debit card, the 
consumer is protected in that losses are limited to $50 as long 
as the loss or the theft is reported in two days. I believe the 
new Consumer Financial Protection Bureau has just proposed 
regulations that would extend a similar kind of stop loss for 
your kinds of cards. Very quickly, do you support those? Mr. 
Streit.
    Mr. Streit. We do. The regulation is Reg E, and that 
applies to deposit accounts, and so we are fully supportive in 
our Reg E shop today. In other words, our bank complies with 
those same Reg E laws that any checking account would offer or 
any credit card would offer a consumer.
    The difference is that these are not accounts. In other 
words, the person who has been scammed is not a Green Dot 
customer. They are not an account holder. They do not have any 
bank account with us. The scammer, if you will, is the one who 
has the bank account, either with us or with one of our partner 
banks. He utilizes our deposit services, so, in that case, 
there is no name. The person scammed is often anonymous. You do 
not know who that is and they do not have an account with us to 
block or to protect, so, it is a different kind of a thing. It 
is a transference of funds, but, on the deposit account, you 
are correct. Deposit holders are protected.
    Senator Collins. That is not really my question, and I know 
my time has expired, but----
    The Chairman. No, continue.
    Senator Collins. What I am asking is if someone purchases 
through you, one of your three companies, a card and loads $200 
on it and that is ripped off by a con artist and then the 
senior realizes that, do you protect them from that loss by 
refunding the money if it is reported within two days the way 
it would work for a credit card or a debit card.
    Mr. Streit. Maybe, Skeet, you can answer it better.
    Mr. Rolling. Sure. Today, we do not. We consider it just as 
if they had given $200 in cash away or any other financial 
services device, so, that is not reimbursed at this point. No, 
ma'am.
    Mr. Tauscher. The same is true for our company.
    I do think--I do think there is going to be a period of 
time where we are all going to have to reconsider that over the 
next six months. Whether we will come down on that side of that 
point of view, I do not know. Today, we look at it exactly like 
Mr. Rolling and Mr. Streit do and behave in the same way, so, 
it is--but, it is a difficult question, and, obviously, it is 
different than people sort of stealing money out of a bank 
account, but, still, somebody at the end of the day is out the 
money.
    Senator Collins. Thank you.
    The Chairman. Senator McCaskill.
    Senator McCaskill. Well, let me just follow up. Since she 
was out of time, I will try to follow up. It is like stealing 
money out of a bank account, because to that senior, that money 
is there and they see that as their bank account. Now, it may 
not be a traditional bank account, but it is their money and it 
is, they think, being held by you safely, so, do you believe 
that the regulation that has been proposed by the Consumer 
Financial Protection Bureau is going to put you on the same 
footing as if someone got my card number off my credit card and 
charged--she said $200--let us say somebody ripped off my 
credit card information and fraudulently charged $150 on my 
credit card. I would only be liable for $50 of that.
    Mr. Streit. Right.
    Senator McCaskill. Why is the rule that is being proposed 
going to put you on equal footing with a credit card company 
under that situation, and do you support that? Yes or no?
    Mr. Streit. Yes. We already----
    Senator McCaskill. Okay.
    Mr. Streit. Not only do we support it, we already do it.
    Senator McCaskill. Okay.
    Mr. Streit. I want to--I am not trying to be argumentative. 
I am very respectful of this and I am deep into the topic and 
deeply concerned about it, but we are conflating terms here 
accidentally, and it is easy to do because it is a complex 
business.
    If you have a prepaid card, that is an FDIC bank account 
that, if it is issued by a Reg E compliant bank like Green Dot 
bank, you are covered in every way, which you just said, and 
every manner, shape, and form, and, in fact, this year alone, 
we will do something like $20 million in charge-offs related to 
refunding consumers money that they have lost on their bank 
account.
    Senator McCaskill. Okay.
    Mr. Streit. The product, though, that we are here speaking 
about is a deposit slip. It is not a bank account. There is no 
name associated with it. There is no account associated with 
it. It is a transfer--I am trying to think how to explain it 
better--you are not putting it on an account. You are 
suspending it and then you are giving it to the bad guy to put 
on his account. It never goes onto an account, and that is why 
you eliminate the PIN.
    To your point, by getting rid of the PIN pack, it avoids 
that problem. There is no way to do that, but, the PIN card 
itself is simply a deposit slip. It would----
    Senator McCaskill. It is not being held in a bank----
    Mr. Streit. I am having trouble explaining it better, but--
--
    Senator McCaskill. It is not being held in a bank. It is 
being held in suspension.
    Mr. Streit. Yes. It is a deposit slip
    Senator McCaskill. Okay.
    Mr. Streit. That is transferred, and that is the 
difference----
    Senator McCaskill. Does it say anywhere on your marketing, 
when you say----
    Mr. Streit. Oh, yes. Absolutely.
    Senator McCaskill. I do not want to----
    Mr. Streit. Yes.
    Senator McCaskill. It says, reload prepaid cards. Make 
same-day payments. Add money to PayPal account. Is there a 
check there that says you will not get it back if it is ripped 
off?
    Mr. Streit. It is, yeah. In the instructions on the back, 
if you take a look at it, we make sure--first of all, the 
warning is gargantuan and we keep using more shocking colors, 
and you have to scratch through the warnings just to get to the 
number--that this is a--we are doing what the consumer 
instructs. If they instruct us to move that money to an 
American Express card account or to a Green Dot card account or 
to an account by someone--and we do that and the account is 
credited, the product's job is done.
    The challenge here, which is why we are eliminating the 
product, is that the product itself has not done anything wrong 
and the company has not lost anyone's money. The problem is, 
the consumer--let me give you a better analogy.
    Maybe this is----
    Senator McCaskill. The consumer----
    Mr. Streit. [continuing.] A better way to explain it----
    Senator McCaskill. I understand what is happening.
    Mr. Streit. Yeah.
    Senator McCaskill. The consumer is being duped----
    Mr. Streit. Yes.
    Senator McCaskill. [continuing.] Into thinking they are 
giving their money to----
    Mr. Streit. To somebody real, right.
    Senator McCaskill. [continuing.] Somebody real, and in 
reality----
    Mr. Streit. They are not.
    Senator McCaskill. [continuing.] They are being ripped off. 
I get what is happening.
    Mr. Streit. Yeah.
    Senator McCaskill. Let me get to the prosecution part. You 
say there have been a lot of successful prosecutions. Do you 
have analytics on any of that? Can you tell me how many people 
has the money been recovered, and/or gone to prison, and/or 
been convicted of felonies? Do any of your three companies keep 
the analytics on----
    Mr. Streit. We do----
    Senator McCaskill. [continuing.] Company successful 
prosecutions?
    Mr. Streit. Prison, I do not know. I cannot tell you that 
part, because I do not know that--by the way, I am the CEO and 
we have a fabulous team of over 300 people who work in risk and 
fraud, and if our head of fraud operations were here, maybe 
they could tell you that. So, prison----
    Senator McCaskill. Well, I think it would be helpful for 
the committee to learn that.
    Mr. Streit. Yeah. Well, we could supply----
    Senator McCaskill. I would like to know----
    Mr. Streit. Oh, you bet.
    Senator McCaskill. --and what do you see as the barriers, 
any of you, toward successful prosecution in terms of your 
relationship with law enforcement or them saying, this is too 
de minimis for us to worry about. I mean, I am thinking back in 
my experience. If one of your companies called me and said, 
``Hey, we have got a con artist and we know they have taken 
this amount of money,'' I would want to know that this was 
someone who had done this repeatedly, or I would say, ``You 
need to be in municipal court--"
    Mr. Streit. Well, the secret to prosecution, and Skeet is 
on the front lines in his company and would probably know more 
about the operational aspects of it--the trick is keeping great 
recordkeeping and being able to give evidence to law 
enforcement so they can have a successful prosecution. Simply 
saying, ``Hey, we think Joe Blow took $50,'' does not excite 
law enforcement necessarily, and, again, when they speak to the 
victim, oftentimes the victim says, ``No, no, I meant to do 
that. I did do that.'' So, there are some jurisdictions that 
may not believe there has been a crime committed at all in that 
particular case, so, it is a little bit more complicated.
    To your point, absolutely. You keep records. You keep track 
of it. You come up with compelling evidence to help law 
enforcement say, ``Wow. Follow this trail.'' We think there is 
this much money. We see a pattern here with multiple accounts 
off multiple banks, and we have had many, many arrests and are 
quite proud of that and we can certainly give you a list of 
those and give you a sense of how we monitor that.
    Skeet, at your company, you may have better information. I 
know you are more hands-on.
    Mr. Rolling. Sure. Senator, a couple of comments. In the 
course of fraud prevention and detection, there are two real 
disciplines. One is controlling the opportunity for the fraud 
to occur and the other is to harden the target, make it more 
difficult for that crime to occur. We work in both dimensions.
    Frankly, what we struggle with--and when I say, controlling 
the opportunity, I am talking about consumer awareness. For the 
purchasers of these products, users of these products, how can 
we better protect them? How can we make them aware of the risk 
related to these products and what you should do and what you 
should not do, and we have been very up front and candid and 
communicative about how to use these products successfully. We 
also train our retailers. We have tips for our retail partners, 
and we have a huge distribution network, and we cause them to 
be trained to make sure they can spot the issues, as well, 
there.
    In terms of hardening the target, we are doing exactly that 
by retiring this product, going to a more robust method with 
the swipe reload such that these issues will go away.
    Senator McCaskill. Right. Well, my time is out, and I do 
not mean to cut you off, but I want to be respectful of the 
fact we have votes.
    Mr. Rolling. Sure.
    Senator McCaskill. We have been working--it is a little bit 
like robo calls. Phone companies are not the problem, but they 
are in the best position to help us stop robo calls and they 
have not really stepped up, and we have done a lot of hearings 
on this in my subcommittee over in Commerce on the robo call 
space. This is very similar.
    You all are in the best position to stop this, and I know 
you are working on it, but I look forward to working with the 
Chairman on your--and the new Chairman--on legislation that we 
can put, maybe, together to combine these two areas that would 
delineate clearly the responsibilities of informing consumers 
and protecting consumers----
    Mr. Streit. It is a great idea, and you will find a very 
willing and cooperative--I do not know much about the phone 
companies, but in terms of the prepaid industry, you will find 
a very willing group. It harms our reputation. It harms our 
fabulous brand name.
    Senator McCaskill. Yes.
    Mr. Streit. It is a horrible thing. It is a disgusting 
thing.
    Senator McCaskill. Well, they have not been quite as 
willing to do that----
    Mr. Streit. No, but we have a----
    Senator McCaskill. [continuing.] We are working on it.
    Mr. Streit. We have a tremendous division that does just 
that, and we should work together more on it.
    Senator McCaskill. That is great. Thank you.
    Mr. Streit. You bet. Yeah.
    Mr. Tauscher. Senator, just to add, I do not have the data, 
either, but I believe that while the fraud itself is too big, 
it is certainly a smaller number of the whole. The amount of 
people that we are catching today are not nearly enough. It is 
a pretty small number.
    Senator McCaskill. I figured that.
    Mr. Tauscher. I do not have the data. It is not like we do 
not catch any. I am sure my friends on the right here catch 
lots, but, clearly, the steps that we are talking about today 
that they are taking, that we are taking, are all aimed at 
reducing this fraud, and I think we sincerely think we can do 
that.
    Senator McCaskill. Okay.
    Mr. Tauscher. Frankly, if it does not do it, then we are 
going to keep working on it.
    Senator McCaskill. Thank you.
    The Chairman. Senator Donnelly.
    Senator Donnelly. Thank you, Mr. Chairman, and I want to 
thank you and Ranking Member Collins, to commend you for your 
unwavering commitment to our seniors through your leadership in 
this committee. It has been an honor to be part of this 
committee.
    I want to thank you and your staff for helping on the field 
hearing we had in Indianapolis this summer in regards to this 
very subject of scamming seniors. The cooperation, the 
assistance, the information we got was, I do not know if the 
word is scary or alarming or something, but the message that 
everybody should take away of how vulnerable our seniors are. 
Our State alone registered almost 25,000 cases of fraud and 
almost 4,000 cases of identity theft in our State, almost a 
$2,000 average on each one.
    Mr. Tauscher, I wanted to ask you, in regards to--you 
talked a little bit about your monitoring systems to spot 
potential fraud. At what point does your system first flag a 
transaction as possibly suspicious?
    Mr. Tauscher. Well, there are really a series of places it 
does it. Clearly, at the point of sale, there are both limits 
and frequency checks, so, if someone is using--attempting to 
load money that is over and above the amount that we have set 
up as a limit, there is a flag. If they are attempting in a 
store to frequently load money or multiple are--our average 
store today does not sell multiple of these reloaded chips a 
day, so when we see activity of that level, we literally move 
in to alert the store. At a certain level, we will shut the 
store down entirely and take it out of that business, so, that 
is the first line of attack.
    With our new safe system, we are able to watch the money as 
it is sitting in the safe, if you will--it is not the money, 
but if the Reloadit process is sitting in the safe--and track 
it through that process and what the customer does to it. Of 
course, it gives the customer a lot more control on what they 
do, and then, of course, as the money moves on to different 
cards, so, there is a series of different steps where the 
systems are monitoring what is going on and setting up alerts.
    Probably one of the most successful things that we have 
been able to do--again, I am sure Mr. Rolling and Mr. Streit 
have done the same thing--is something not talked about today, 
is our store, our distribution stores were suffering a lot of 
fraud, and that fraud began to peak this year and go down 
substantially because we were able to set up alerts and turn 
stores off, and that was fraud where, as an example, a store 
manager would be called at night and told by a fraudster to 
load a bunch of cards up and give him the numbers, and he was 
calling from corporate to do a test, and they would go off and 
do that and a lot of money would be stolen in that regard, and, 
we have managed with some of these limits, as an example, to 
pretty well eliminate that or really shut it down.
    The whole fraud tracking barrier thing that we all are 
attempting to do is a science. It is one that sort of moves. 
You have to keep understanding what the fraudster is doing and 
then constantly checking. The good news is that we have on a 
real-time basis--we are hooked to the point-of-sale transaction 
on a real-time basis. We are hooked to the loading transaction 
on a real-time basis. We are hooked to the usage of the GPR 
transactions on a real-time basis, so, we really have sight 
into all of this.
    Senator Donnelly. Do you rely at all on the expertise or 
the ability of the person who is working at the store, or is it 
all computer-driven----
    Mr. Tauscher. No----
    Senator Donnelly. [continuing.] That computer algorithms 
pick these up?
    Mr. Tauscher. We have done just what has been talked about 
before. We spent a lot of time and energy educating the store 
personnel, literally have created videos for store training. I 
brought along an example of something we have done here 
recently that was a pretty big step for us, actually. We took 
this sign, which not only talks about the fraud but spells out 
the kinds of fraud that is currently, and we have now posted it 
literally on the racks that carry these cards, so, sitting on 
the rack is this large sign that says, ``Read this. These are 
the kinds of things that you should beware of.'' We have done 
the same thing on the website, and in these systems or the 
usage of these cards, people often go to the website, so, there 
is clearly an opportunity here to use our websites, to use our 
point of sale, and to use our people in the store to get them 
educated.
    As Steve said, one of the real problems here is that 
sometimes the person who has been defrauded will sit and argue 
with a store person----
    Senator Donnelly. Right. I understand.
    Mr. Tauscher. --who is trying to talk them out of doing it. 
It is really a sad situation.
    Senator Donnelly. Yes. Now, obviously, you run different 
operations. When you get together, do you ever talk about best 
practices or what has been most successful for you in reducing 
fraud or in protecting our seniors? Obviously, there are 
industry conferences and stuff, but, you know, there are 
proprietary computer systems and other things. Do some of you 
have a product that you look up and go, ``Oh, my God, this has 
worked so much better for us this year.'' Will you work with 
others on getting that through, as it is not so much a 
competitive advantage as it is just protecting your customers?
    Mr. Rolling. Sure. There is ongoing dialogue to that end 
today. We share best practices that are industry initiatives, 
where--that promote the collaboration and the sharing of 
information and the development of best practices, so yes sir, 
that is a resounding yes that we will share. You know, we would 
like to have ongoing dialogue with this committee for the same 
end, because my fear is we are going to move this issue from 
this portion of prepaid somewhere else, in another financial 
services product, and we need to find that, where it lands, and 
then prepare to defend that area, as well.
    Senator Donnelly. Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator.
    Mr. Tauscher, since Blackhawk's card is going to be the 
only available reload card once the other two have retired 
their product, are you concerned that the thugs are going to 
come and invade your space since the other two are going to be 
swiping cards?
    Mr. Tauscher. I guess we have a fair amount of confidence 
that what we have built here will put up real barriers for 
thugs. The fact that a thug has to set up this safe, give us an 
e-mail, a password, let us understand the device he has used to 
set it up so we can use the identity recognition we have for 
that, all the timing and the way that the safe works gives us a 
pretty good barrier to trap and catch thugs and these results.
    The facts are, while this kind of system that we have 
employed today has been used and is being used by banks in 
their online and mobile banking applications, this will be the 
first time it has really been used broadly in the prepaid 
industry, and, as you said, or as you noticed I said earlier, 
we are going ahead and putting across our network next year the 
swipe reload mechanism, and, if it turns out during the course 
of next year that we have not created a better mousetrap--one, 
by the way, we would be delighted to share if it does what we 
believe it will do--if we have not created a better mousetrap, 
then we will move to swipe reload.
    We think there are some very good reasons to maintain the 
Reloadit Network. The consumers are clearly used to using it. 
There are some use cases, as an example, when someone wants to 
reload their child's card and the child is somewhere else, this 
will allow for that, so we think there are some very good cases 
of what this can help. We think we have put enough protection 
and barrier to make it an issue that we can make go away or at 
least be reduced dramatically.
    I will say it again. If it turns out we become the focus of 
it, if it turns out that what we have done is not working, we 
are laying a complete back-up plan to be able to go to swipe 
reload.
    The Chairman. Mr. Streit and Mr. Rolling, what do you think 
about his mousetrap?
    Mr. Streit. I would never comment on another man's 
mousetrap.
    No, I do not know. To be honest with you, this is the first 
I am hearing of it, and I am no technology whiz kid, so I would 
rely on those more knowledgeable, but, it certainly seems like 
a step in the right direction.
    I can tell you, at Green Dot, we tried everything under the 
sun, as you all know from our previous meetings together, 
geolocation, device tracking, shutting down cards.
    The challenge for us proved to be too great. Either you 
were blocking the fraudster but accidentally also blocking 
innocent people, and that resulted in a legitimate person 
becoming furious, and that was a problem, or the senior 
themselves, even though you are preventing them from scams, 
would write a letter to our regulator saying, ``Hey, Green Dot 
held my funds,'' and then you have an angry regulator, because 
they just do not want to believe it is fraudulent.
    We just felt like we were in a position where we could not 
win no matter what we did, and that is why six, seven months 
ago, we said, let us get rid of this thing and get out of it. 
Well worth--life is too short, if you will, and it is harming 
people, and that is not our goal in life, so----
    The Chairman. Did you consider anything like his mousetrap?
    Mr. Streit. Well, that is very unique. What Blackhawk has 
come up with is unique and it may well work very, very well. 
They have good technology and so--I just do not know enough 
about it, Senator. I am sorry, but----
    The Chairman. Mr. Rolling, do you think that he can offer a 
safe reloadable product?
    Mr. Rolling. I only know what I heard today, Senator. What 
I will tell you is that any traction or resistance we can cause 
for the criminals will be a very good thing.
    Generally, my experience is, once you show them a decline 
for their current pathway, they will move on to another area. 
We look forward to learning more about it and hearing what the 
results are with it.
    Mr. Streit. That is right.
    The Chairman. Approximately when did you all offer these 
products to begin with? How many years ago?
    Mr. Streit. Oh, gosh. Well, MoneyPak hit the market back in 
2003, I want to say, so quite a bit of time, and----
    The Chairman. Then, why do you think fraudsters gravitated 
to your products?
    Mr. Streit. Well, I have a belief--there is no way to find 
out scientifically. You cannot do a survey of fraudsters, but, 
I have a belief, and Skeet, you may have it. I think as--fraud 
will find, what is the phrase, the least--the path of least 
resistance, and I think the MoneyPak was so convenient, is so 
convenient, and priced properly and so available that they 
thought, oh, here is a great way to use that.
    In the past, they used check fraud. In the past, they used 
money transfer companies. In the past--we run a bank, and part 
of bank training going back 50 years was teaching tellers how 
to spot a senior citizen being manipulated by a younger person 
with her in the lobby of the bank, so, this tells you how many 
years ago this kind of thing was happening.
    As technology gets better and as seniors are more and more 
on Facebook, which is a huge outlet for seniors, you are now 
seeing fraud pop up on Facebook, the grandparent scheme and all 
kinds of text messages in the name of your relatives, and that 
is a whole new one now.
    I think it all--it is a tough thing. The trick is to make 
our product so difficult to use for that, or not to have them 
at all, that the fraudsters go somewhere else, but I do want to 
be clear, and we said this earlier and you know this on the 
committee, the fraud will not end. It is just going to keep 
going to the next innovation.
    The Chairman. Well, how do you, Mr. Rolling and Mr. 
Tauscher--short answers, please, because the vote has started--
how do you run a profitable business with these guys coming in 
and taking advantage of your customers?
    Mr. Tauscher. Well, this--you know, our business is not 
unique to fraudsters. Anybody in the financial services 
business, from banks to prepaid companies, are subject to this 
fraud and we fight it every day. You heard some numbers of 
people that are in the risk department from Steve and Mr. 
Rolling, and the facts are, it is just a continuous fight, and 
the trick is to keep all of it to a level that we still have 
viable products. One of the hardest things to do here is to 
take some balance with all the methods you want to do to 
eliminate fraud and still keep a product. I mean, this GPR 
product we are talking about is generally loved by the people 
who are using it.
    The Chairman. Mr. Rolling, 30 seconds.
    Mr. Rolling. Yes, sir. I have worked the fraud issues in 
the banking industry, in the processing industry, and in the 
prepaid industry. Security mechanisms are a cost of doing 
business. Fraudsters are after us continually. We have to 
continue to innovate, create, and use technology to our best 
advantage and take good care of our consumers.
    The Chairman. Mr. Tauscher, let us say you decide to move 
on to the swipe card. Where is the criminal going next?
    Mr. Tauscher. Well, I--I think, without question, there are 
plenty of places in the financial system for criminals to do 
things, and as Mr. Rolling said, we do not always know. The 
truth is, they tend to find the weakest point in all that you 
are doing, and you spent lots of time trying to game play and 
figure out what that is, but besides the fact these are thugs 
and criminals, they are not stupid and it makes it very 
difficult as an enemy. As I think you so eloquently said, Mr. 
Rolling, this is just a continuous fight. It is a cost of our 
doing business and we just cannot--we cannot relinquish any of 
our responsibilities in this regard.
    The Chairman. Okay. Now, let me tell you what I am going to 
encourage my colleague, as the future Chairman of this 
committee, to do with her staff and our staff, as well. Since 
you all are getting rid of the reload cards, we have these 
Jamaican scammers calling us all the time. I mean, they are 
sloppy, they are aggressive, and they continue to call here. 
They continue to call our staff, and so, we are going to find 
out if they are continuing to call us on reload cards and we 
will know if you have changed or not, and then we will be able 
to monitor your situation, as well, on these scammers calling, 
and, so, perhaps there will be some important feedback from 
you. Other than the senior calling you, we will have our 
professional staff calling you, as well.
    All right. I am going to ask Senator Collins to stand with 
me, and I am symbolically, since this is our last meeting, 
going to hand her the gavel----and wish her the best wishes, 
even though she will actually take this over officially January 
6th. I want you to know it has been a pleasure----
    Senator Collins. Thank you very much.
    The Chairman. [continuing.] And I give you the 
Chairmanship.
    Senator Collins. That is sweet of you. Thank you.
    The Chairman. The meeting is adjourned.
    Senator Collins. The meeting is adjourned. Thank you, 
everybody.
    [Whereupon, at 3:07 p.m., the committee was adjourned.] 
      
=======================================================================


                                APPENDIX

    
=======================================================================


                      Prepared Witness Statements

=======================================================================
                      Testimony of Steve Streit, 
             Chief Executive Officer Green Dot Corporation

    Chairman Nelson, Ranking Member Collins and members of the 
Committee, My name is Steve Streit and I am founder, Chairman 
and CEO of Green Dot Corporation, a Bank Holding Company 
regulated by the Board of Governors of the Federal Reserve 
System, and Founder and Chairman of Green Dot Bank, a State 
chartered, fed-member commercial bank regulated by Federal 
Reserve and the State of Utah Department of Financial 
Institutions.
    Green Dot appreciates the opportunity to submit testimony 
for the hearing entitled ``Private Industry's Role in Stemming 
the Tide of Phone Scams.'' While impossible for any person or 
organization to completely stop con artists and their 
associated criminal activity, Green Dot has been a leader in 
developing techniques to help prevent such scams and it is 
therefore our pleasure to work with the Senate Committee on 
Aging in an effort to protect seniors, one of America's most 
vulnerable populations.

About Green Dot

    Green Dot is a 15 year old entrepreneurial startup that 
invented what is known today as the prepaid debit card 
industry. Over the years, prepaid debit cards have become 
popular bank account products for millions of Americans because 
they are convenient, easy-to-use, easy-to-get and are generally 
much lower in cost compared to traditional bank checking 
accounts or credit cards. Prepaid cards are especially popular 
with low and moderate income Americans because consumers in 
that economic segment often have a difficult time obtaining 
traditional checking accounts and credit cards, which generally 
require certain minimum credit score thresholds and/or a 
successful past history of holding a checking account in order 
to obtain such accounts. While Green Dot invented the prepaid 
debit card industry and is today the largest prepaid debit card 
provider in the United States, many leading banks and financial 
services companies sell prepaid debit cards to consumers, 
including Chase, American Express, U.S. Bank, Wells Fargo, 
Comerica and many others.

About the MoneyPak

    Around 2003, as part of Green Dot's growing prepaid card 
business, the company needed to find an easy way for customers 
to be able to reload their prepaid card with cash at many 
different retailers from coast to coast. The challenge was that 
retailer ``Point of Sale'' (POS) systems were fairly old, 
inflexible and inconsistent from retailer to retailer, so, to 
overcome the lack of modern retail technology, Green Dot 
invented a ``one size fits all'' product called the 
``MoneyPak.'' The MoneyPak was designed to serve as a defacto 
``deposit slip'' allowing prepaid card customers to add cash to 
their prepaid card at many retail stores without the retailer 
having to modify their existing POS equipment. The innovation 
behind the MoneyPak that allowed it to be sold without POS 
modification was the ``PIN method of reloading.'' With the 
innovation of selling a ``PIN,'' a unique multi-digit number 
that represented a certain amount of money, the customer could 
then buy a PIN for certain amount of money and then redeem that 
PIN online or by phone and instruct Green Dot to load the value 
represented by that unique PIN to whatever prepaid card they 
instructed. Shortly thereafter, with the PIN method of 
reloading in production, Green Dot was then able to open its 
proprietary reload system to other prepaid card companies.
    This gave birth to the Green Dot Reload Network, which 
offered users of many different brands of prepaid cards the 
ability to add cash to their prepaid card at any Green Dot 
retail location. Because of the MoneyPak's ubiquity and ease of 
use, it became an almost immediate hit with consumers and grew 
in popularity in proportion with the growth of the prepaid 
debit industry itself. Today, the Green Dot Network serves 
customers from nearly 200 prepaid programs, including Green Dot 
customers, who can add cash to their prepaid cards at nearly 
100,000 retailers. In 2013, the Green Dot network processed 
more than forty million reload transactions on behalf of 
millions of Americans who rely on prepaid cards as their bank 
account of choice.

Victim Assisted PIN Fraud

    While the PIN method of reloading facilitates the safe 
reloading of cash on behalf of millions of honest customers 
each year, the PIN method of reloading a card has also become 
susceptible to exploitation by scammers who target seniors with 
confidence scams. Such scams are designed to convince the 
senior that they have won a prize or some other similar 
enticement and that the way for the senior to collect the prize 
is to buy a MoneyPak (or a similar competitor's product) for a 
specified amount of money and then provide the secret PIN 
number associated with that MoneyPak to the scammer. This is 
the equivalent of the senior telling a stranger their debit 
card account number and providing them their secret PIN, or 
providing a con artist with their bank account number and their 
online login secret password. As the Committee knows, the 
scammer immediately uses that secret PIN to empty the MoneyPak 
and transfer the associated funds to their own account. At that 
point, the senior's money is gone and the scammer is gone.
    This method of fraud is called ``Victim Assisted Fraud'' 
because the scam can only happen when a willing victim 
purposely gives away their personal information to a stranger. 
Because the victim themselves actively facilitates the scam, it 
has been very difficult to stop. Based on dispute filings, we 
believe Victim Assisted Fraud represented approximately $30 
million in cash loads in 2013 out of total load volume through 
Green Dot's network of approximately $20 Billion, or less than 
one-quarter of 1 percent of loads. While this amount of fraud 
is not material in statistical terms, Green Dot recognizes that 
it is certainly material to the senior who fell victim to the 
confidence scam.
    In an effort to help stop this type of scam, Green Dot has 
spent millions of dollars to combat victim assisted fraud. Such 
measures include:

    A.  Developing technology to help identify potentially 
nefarious transactions and blocking the PIN before the fraud 
can be completed. This has helped somewhat, but often times 
ends up snaring too many honest customers along with the 
scammers.
    B.  Developing methods to quickly track the flow of funds 
after being notified by a victim of such a scam. This allows 
Green Dot to attempt to block and recover funds for the victim 
and to provide law enforcement with detailed information on the 
scammer. This has helped somewhat, with Green Dot reclaiming 
millions of dollars in scammed money and returning that money 
to victims, while helping law enforcement to make a number of 
key arrests both domestically and internationally.
    C.  Blocking cash withdrawals on its Green Dot Bank issued 
debit cards at ATM machines outside the United States so that 
scammers won't want to use Green Dot Bank issued cards as the 
receiving account of such stolen funds. This has been 
effective, but Green Dot Bank issued cards represent only a 
portion of the overall prepaid card industry.
    D.  Last, Green Dot has spent many millions of dollars 
reprinting and distributing all MoneyPak packaging with large 
red warning notices where the PIN is located urging consumers 
to never give out their secret PIN number. We have also worked 
with consumer advocates, the Better Business Bureau and law 
enforcement agencies to place warnings and create videos on 
helping educate seniors on confidence scams. However, it would 
appear that this tactic has not achieved the intended goal 
because the seniors ignore the warnings, convinced that the con 
artist is genuine.

    All these tactics in aggregate have indeed helped somewhat. 
However, given the ``Victim Assisted'' nature of the fraud and 
our inability to completely eradicate this nefarious use of our 
MoneyPak PIN product, Green Dot has decided to discontinue the 
PIN method of reloading a card altogether, and instead, move 
fully to a more modern and more fraud resistant ``card swipe'' 
reload process. The swipe reload process is a more fraud 
resistant reload method because ``swipe reloading'' requires 
the actual cardholder to be present with their card in the 
store in order to reload, so, without the PIN, the scammer will 
have no method of instructing a senior to buy a product and no 
method of redeeming any associated PIN number.
    Of course, confidence scams have been around for hundreds 
of years and we understand that seniors will always need to be 
cautious of strangers bearing gifts, but at least Green Dot's 
MoneyPak will no longer be able to be used by scammers to 
facilitate such fraud.
    The PIN product has already been removed from Walmart and 
many other Green Dot retailers and will be completely 
unavailable in all Green Dot retailers by end of Q1 2015. 
Today, the vast majority of Green Dot reloads are already 
performed using the swipe method of reloading and not a PIN 
number.
    Green Dot is proud of our efforts to protect our nation's 
seniors from scams, and we are ready and willing to continue 
our work with law enforcement, the Committee and its members to 
explore other ways in which we can enhance the protections for 
our nation's most vulnerable consumers.

About Green Dot

    Green Dot Corporation is a bank holding company that owns 
Green Dot Bank, a State member bank located in Provo, Utah. We 
are regulated by the Board of Governors of the Federal Reserve 
System and the State of Utah Department of Financial 
Institutions. We have approximately 800 domestic employees with 
offices in Pasadena, California; Palo Alto, California, 
Bentonville, Arkansas, Provo, Utah, Sandy, Utah, Tampa, Florida 
and Birmingham, Alabama.
    Green Dot's mission is to reinvent personal banking for the 
masses with a sole focus on low cost, fair and easy to use 
banking products for low and moderate income Americans. Our 
accounts feature no penalty or overdraft fees of any kind and 
short, simple and clear disclosures. Green Dot cards and reload 
services are available to consumers at 100,000 retailers 
nationwide, online and via the leading app stores. Each year, 
Green Dot will open more than 5 million new FDIC insured bank 
accounts for Americans who were either previously unbanked or 
underserved by traditional banks.
    Green Dot prepaid cards are not anonymous and are fully 
compliant with the USA PATRIOT Act. Green Dot products adhere 
to our customer covenant of clear disclosures, no minimum 
balance requirements and no penalty fees ever and our products 
routinely win numerous awards and positive recognition from the 
nation's leading consumer groups. Furthermore, Green Dot is 
publicly on record of supporting the CFPB's newly announced 
proposed rule on prepaid cards. See the attached press release 
for further information.
     Testimony of R.B. ``Skeet'' Rolling, ChiefOperating Officer, 
        International CommunicationsInternational, Inc. (InComm)

    Chairman Nelson, Ranking Member Collins, and members of the 
Committee, thank you for holding this hearing on the prepaid 
industry's role in mitigating elderly targeted fraud and for 
inviting InComm to participate. We have followed closely the 
Committee's efforts to investigate and reduce fraud perpetrated 
against some of our nation's most vulnerable citizens, and I am 
pleased to be here today to share what InComm is doing to 
eliminate the ability of fraudsters and scam artists to take 
advantage of seniors in what we refer to as ``victim-assisted 
fraud.''
    My name is R.B. ``Skeet'' Rolling and I am the Chief 
Operating Officer of ITC Financial Licenses, an affiliate of 
InComm that offers numerous financial services products, 
including the Vanilla Reload Network. I've been investigating 
and working to prevent fraud for over 30 years. I started my 
career as a law enforcement officer. After a brief stint in 
retail corporate security, I entered the banking industry and 
helped manage all facets of credit and debit card operations 
for what is now Synovus Financial Corporation for 10 years. For 
the next 11 years I led the development and delivery of fraud 
and risk products for TSYS, one of the world's largest payment 
processors. I've been with ITC Financial Licenses for the past 
11 years, leading our compliance, fraud and anti-money 
laundering teams for all of InComm's business globally. In 
addition, I frequently speak at industry conferences on matters 
such as identity theft, fraud, and compliance. I am also a 
member of the executive board of the Columbus, Georgia Better 
Business Bureau. During my time in the financial services 
industry, I have seen many types of fraud, each of which the 
industry has aggressively worked to eliminate. The prepaid 
industry's efforts to eliminate victim-assisted fraud are no 
exception.
    InComm is a leading global distributor and technology 
provider of gift cards, prepaid cards, and payment solutions 
across a wide variety of retail industries around the globe. 
Headquartered in Atlanta, Georgia since its founding in 1992, 
InComm has grown to employ 1,700 people in 30 countries across 
5 continents. ITC Financial Licenses is registered with FinCEN 
as a money services business (MSB) and is authorized to offer 
InComm's financial services products in all 50 States, the 
District of Columbia, Puerto Rico and the U.S. Virgin Islands. 
To that end, ITCFL is licensed as a money transmitter by 46 
States and the 3 territories, and is subject to the oversight 
of the banking regulators in each of those jurisdictions, 
including the Florida Office of Financial Regulation, where 
Chairman Nelson is from, and the Maine Bureau of Consumer 
Credit Protection, where Ranking Member Collins is from. At the 
Federal level, we are regulated primarily by the Consumer 
Financial Protection Bureau (CFPB).
    InComm and ITCFL are proud to offer the Vanilla Reload 
Network. Our network has grown to be the second largest reload 
network in the country, with approximately 250,000 customers 
using the network monthly through nearly 70,000 retailer 
locations nationwide. Vanilla Reload allows consumers to load 
funds to their general purpose reloadable (GPR) prepaid cards, 
so that they may use those cards to shop online or in retail, 
pay bills, transfer money, and manage their spending and 
saving. Consumers rely on Vanilla Reload and similar industry 
solutions for an easy, safe, and convenient way to add funds to 
their card accounts, especially those customers who are either 
unbanked or who use these card accounts as a bank account 
replacement. The vast majority of consumers--99.9 percent--use 
Vanilla Reload legitimately.
    In terms of fraud prevention, one of the biggest issues our 
industry faces is the mitigation and prevention of victim-
assisted fraud. This type of fraud is difficult for industry 
participants to detect and eliminate because the underlying 
scams rely on legitimate customers being deceived into using a 
reload network to send money to a criminal. The retail 
transaction initiated by the victim occurs as any typical, 
legitimate transaction, and funds are subsequently redeemed to 
a GPR card in a likewise typical manner.
    This fraud typically takes the form of a promise of free 
money, winning the lottery or qualifying for a loan. The 
criminals are ruthless, often preying on the elderly, and 
unfortunately they continue to find new ways in which to scam 
unsuspecting victims. Most recently, fraudsters have revived 
the ``grandparent scam''--posing as a relative of the victim 
who is in distress and in dire need of immediate financial 
assistance.
    In a typical scenario, the fraudster convinces a victim to 
load money onto a reload product and then the victim provides 
the PIN to the fraudster. Once the fraudster has the PIN, he is 
able redeem the money onto a prepaid card and then either 
quickly spend the funds or withdraw the cash from an ATM. This 
is very difficult to prevent as the fraudster has effectively 
fooled the victim into believing that he or she is helping a 
family member in need or is otherwise providing the PIN to a 
trusted individual. Even when the clerk at the checkout warns 
the victim and even when warnings are placed on products, 
victims are so convinced by the fraudster's story that they 
ignore the warnings and ultimately fall victim to the scam.
    Even at InComm, we have witnessed this criminality on a 
most personal level, when the grandmother of one of our own 
employees purchased a competitor's reload PIN product and lost 
thousands of dollars to a fraudster who pretended to be a 
grandson in need of money to cover hospital and legal expenses 
following a car crash. Even the cashier's warnings did not 
deter the victim from going through with the transaction--the 
fraudster's story was so convincing that all she could think 
about was the well-being of her grandson.
    InComm and ITCFL take our responsibility to our consumers 
very seriously. ITCFL has over 60 employees dedicated to 
compliance, anti-money laundering, and fraud prevention. We 
have invested significant time and resources since we launched 
Vanilla Reload to develop and institute best practices to warn 
consumers about the dangers of victim-assisted fraud and to 
monitor, spot, and stop this fraud. We've created a fraud lab 
to test our products with the latest criminal techniques--as 
fraudsters evolve and change their methods, so do we.
    We train the clerks selling these products to warn 
customers prior to purchase, place warnings on websites, we've 
started a GPR blog used to educate consumers about the use of 
GPR products and to warn them about scams, hired a social media 
coordinator to monitor potential fraud activity that occurs 
online, and we send a fraud resource guide to our retail 
partners across our network.
    InComm has eliminated ATM cash access on its GPR card 
products in countries where we observed a large volume of fraud 
in order to prevent fraudsters from withdrawing stolen funds in 
those countries. We have a robust suspicious activity policy 
with protocols in place to identify fraudulent activity, such 
as multiple reloads from various locations, and we take actions 
to prevent fraud, such as freezing or requesting a third party 
prepaid issuer to freeze the underlying prepaid account to 
prevent ATM withdrawals or purchases when fraud is suspected.
    Further, at InComm we have consistently sought to develop 
new technology and implement program restrictions to make our 
products more difficult for criminals to use. On our GPR 
prepaid cards, we have many daily, monthly, and dollar-based 
limits on ATM withdrawals, reloads, and other activities that 
help reduce fraud and subsequent losses.
    Perhaps most importantly, InComm has developed proprietary 
swipe reload technology which allows a customer to swipe a GPR 
prepaid card at the point of sale to facilitate the reload 
transaction. This process is not only more convenient for 
customers, but also eliminates victim assisted reload fraud by 
preventing the cash from being transferred via use of a PIN. By 
offering card-present reloads, only the person holding the card 
can load funds. We've invested significant amounts of money, 
time, and resources in helping our retailers overcome the 
expense and effort necessary to implement our swipe reload 
technology at their stores and point of sale systems. We were 
pleased to be able to announce on October 24, 2014 that (i) 
InComm added an additional 15,000 swipe reload locations 
(bringing the total swipe reload locations to over 55,000), and 
(ii) InComm will remove the Vanilla Reload PIN packs from 
stores by March 31, 2015. The combination of these actions 
demonstrates our dedication to weed out fraud and prevent 
criminals from misusing our network, and to continue to provide 
a safe, easy, and convenient way for our customers to add funds 
to their accounts.
    InComm's experience has taught us that there are three ways 
to significantly reduce fraud and criminal use of financial 
products. First, consumer awareness. That's why we take steps 
to warn our consumers about the threat of scams across various 
media and work with our retail partners to do the same. Second, 
industry awareness. We have met with the IRS, Secret Service, 
the CFPB, State banking departments, and representatives of 
this Committee to discuss fraud and to determine best practices 
to combat fraud. We are an active participant within our 
industry trade group, the Network Branded Prepaid Card 
Association (NBPCA), and one of our executives is the current 
Chairman of that group. We spend significant time and resources 
educating the retailers which sell our products, and train 
their employees to recognize and warn seniors about fraud 
issues. Third, use of technology. As a leading technology 
innovator in the gift and prepaid market, this is our greatest 
strength. We have developed technology--our swipe reload 
platform--that will eliminate elderly targeted, victim-assisted 
fraud in our reload network. Because of this advancement in 
technology and our efforts to make it available to all of our 
retail partners, we will be retiring the reload PIN product by 
the end of the first quarter in 2015.
    Thank you again for your efforts in calling attention to 
this serious problem and for organizing this hearing to allow 
the prepaid industry to discuss the steps we are taking to 
proactively eliminate opportunities for fraudsters to take 
advantage of seniors. We will continue to do our part to 
eliminate victim-assisted fraud, while simultaneously enhancing 
the reload experience or our customers.
           Testimony of William Tauscher, Chairman and Chief 
          Executive Officer, Blackhawk Network Holdings, Inc.

    Chairman Nelson, Ranking Member Collins, distinguished 
members of the Committee, thank you for providing me the 
opportunity to testify today on the subject of private 
industry's role in preventing victim-assisted fraud against 
seniors. My name is Bill Tauscher and I am Chairman and Chief 
Executive Officer of Blackhawk Network Holdings, Inc. I look 
forward to describing today Blackhawk's innovative and 
aggressive approach to deterring, preventing, and mitigating 
this pernicious type of fraud against seniors and other 
consumers. Blackhawk is grateful for the Committee's attention 
to this important subject over many months and your leadership 
in raising awareness about it.

About Blackhawk Network Holdings, Inc.

    Blackhawk is a leading payment network utilizing 
proprietary technology to offer a broad range of prepaid 
products and payment services in the United States and 21 other 
countries. Our companies support the physical and digital 
distribution of a variety of prepaid products, including gift 
cards, general-purpose reloadable (``GPR'') cards, corporate 
reward cards, incentive cards, rebate cards, prepaid telecom 
handsets, and airtime cards across a global network totaling 
over 180,000 stores worldwide. Our GPR program, however, 
reaches under 20,000 locations in the U.S. And, our Reloadit 
packs are sold in over 10,000 locations, including Safeway, 
Albertsons, Giant Eagle, Kroger, BiLo, Casey's, Dave's, Winn 
Dixie, Harveys, Sweet Bay, Meijer, Food Lion, Hannaford, Save-
a-Lot, Supervalu and WaWa stores. Our network provides 
significant benefits to those who purchase the products and 
services we offer and to our distribution partners who sell 
those products. For consumers, we provide convenience by 
offering a broad variety of quality brands and content at 
retail locations and online, enhanced by customer promotions 
and loyalty incentive programs that may be offered by our 
distribution partners. For these partners, we provide a 
significant, high-growth and highly productive product category 
that drives incremental store traffic and customer loyalty. 
Blackhawk serves in a variety of capacities in the prepaid 
market. We are a program manager for bank-issued network-
branded card products. We are licensed money transmitter that 
issues Discover-branded reward cards and the 
ReloaditTM pack (a GPR card reload and bill payment 
product), and, we are a distributor for both store-specific and 
network-branded gift cards.
    Blackhawk's heritage of innovative prepaid developments 
began in 2001, when it was a subsidiary of Safeway Inc. Since 
our inception, we have looked at the industry with fresh eyes, 
always seeking to solve customer needs to grow our partners' 
business. Our first consumer insight led to a pioneering 
breakthrough--to provide gift cards where they were more 
convenient for consumers, including grocery stores. Over the 
years, we have continued to research what consumers want and 
have rapidly brought these innovations to market. In addition 
to expanding our product line to capitalize on the full 
spectrum of prepaid products, we have also greatly expanded the 
brands we offer and the locations--both digital and brick-and-
mortar--where we offer them.

Blackhawk's Reloadable Financial Services Products

    Consumers have realized that prepaid financial service 
products offer value, convenience and flexibility. As the 
industry has evolved, Blackhawk has brought together a broad 
selection of GPR cards in one place, developing a proprietary 
reload network that is one of the lowest-priced, and most 
convenient. We are proud to distribute to our retail partners 
and to process transactions for a diverse set of GPR card 
products, including those offered by NetSpend, PayPal, Green 
Dot, AccountNow, Univision, T-Mobile, and others. In addition 
to offering a large selection of GPR products under one roof, 
Blackhawk also offers PayPowerTM, our own 
proprietary GPR card brand with desirable features, such as 
free direct deposit and online or phone bill pay, and 
competitive pricing.
    Blackhawk makes it easy and secure for consumers to add 
value to their GPR cards by choosing any of these three 
different load methods:
    Quick Load: Under the quick load option consumers can 
purchase a Reloadit pack at a retail location to load anywhere 
from $20 to $950. After purchasing the Reloadit pack, the 
consumer reloads the GPR card by going online or calling a 
toll-free number to provide a 10-digit PIN number found on the 
back of the Reloadit pack, a scratch-off PIN. This is how 
Reloadit and similar products were originally setup to operate 
for ease of use and consumer convenience. Ninety-nine percent 
(99 percent) of consumers who use this method do so in legal, 
non-fraudulent ways that serve their needs, such as funding a 
GPR card held by a child or grandchild who is away at college 
or by a contractor or household helper who is using a GPR card. 
Blackhawk's introduction of Reloadit Safe was a refinement of 
the product. With the further enhancements we will introduce in 
March next year (including the elimination of quick load with 
the scratch-off PIN and the introduction of enhanced fraud 
mitigation efforts, described in greater detail below) we will 
substantially improve fraud mitigation for Reloadit.
    Reloadit Safe: Recently, Blackhawk has added a new method 
for consumers to reload GPR products participating in our 
Reloadit network. We have created the option for consumers to 
use the Reloadit Safe, which allows cardholders to store their 
Reloadit pack number securely and conveniently. When consumers 
want to load funds to their GPR card(s), the Reloadit Safe 
provides them the opportunity to decide from which Reloadit 
pack they want to load funds, when such funds should be loaded, 
and the amount of funds that should be transferred from the 
Reloadit pack to their GPR card or cards.
    The Reloadit Safe enables Blackhawk to mitigate fraud 
through a variety of tools. Unlike the quick load option, the 
Reloadit Safe requires customers to provide an email address, 
password, a unique device identifier and a separate self-
assigned PIN--different than the scratch-off PIN. The self-
assigned PIN is created to allow the user to authenticate Safe 
access when an unknown or new device attempts to log in and 
gain access to the Safe. This creates a Safe that will only 
permit the customer to load money from a specific device after 
a minimum 30-minute time delay from the purchase of a Reloadit 
pack. The Safe also requires the customer to enter the full GPR 
card number into the Safe prior to transferring funds. We view 
the innovation of the Reloadit Safe as an effective bulwark 
against victim-assisted fraud. With the Safe, consumers who do 
not have the GPR card they want to load with them (such as when 
a child or grandchild has the GPR card at college) can safely 
load funds to that GPR card remotely through Reloadit, and, 
with enhancements that we will roll out in March next year 
(including elimination of quick load with the scratch-off PIN), 
Blackhawk will have enhanced monitoring capability and the 
ability to analyze accounts and account activity more 
effectively. This will allow us to identify fraud more quickly 
and prevent it more effectively, while still allowing consumers 
to retain Reloadit as a tool for accessing their funds and 
transferring them. I will provide more details on these 
enhancements later in this Statement.
    Swipe at the Register: In addition to offering quick load 
and Reloadit Safe options to load GPR cards with the Reloadit 
pack, Blackhawk provides customers in an increasing number of 
locations with the option of funding their GPR card accounts 
via swipe at retail locations, rather than through the scratch-
off PIN. Approximately 50 percent of all retail locations that 
carry our GPR products offer reload on swipe today, but, not 
all retailers can support this functionality today. We are 
currently assisting many of our retail partners in converting 
their point-of-sale hardware to accept ``swipe at the 
register.'' This technology allows for the elimination of 
reloads using scratch-off PINs.

Blackhawk's Commitment to Preventing Fraud

    Our research indicates that less than 1 percent of 
transactions involving Reloadit packs constitute potential 
fraud. Nevertheless, Blackhawk is committed to preventing all 
instances of fraud against consumers and, accordingly, has 
implemented significant measures to prevent and mitigate 
different types of fraud, including victim-assisted fraud.
    The key components of our anti-fraud efforts include:

      monitoring GPR card and Reloadit pack activations 
and transaction monitoring using Blackhawk data and 
sophisticated anti-money laundering and fraud detection 
software, 24-hour Risk management resources and risk-based 
funding delays;
      educating and training our retail partners and 
their employees about victim-assisted fraud;
      ensuring consumer awareness of fraud threats; and
      coordinating with law enforcement and regulatory 
agencies.

    Monitoring GPR Card and Reloadit Pack Activation and 
Transaction Monitoring. With respect to activation monitoring, 
Blackhawk performs proactive analysis of GPR card registrations 
and their associated attributes. We have developed and deployed 
a sophisticated point of sale monitoring system that provides 
alerts to Blackhawk Risk Management personnel in cases where 
potential fraud is detected based on suspicious activity, such 
as an unusual number of sales of Reloadit packs in a specific 
store or region or atypical amounts of funds to be loaded. If 
such cases are observed, Blackhawk Risk Management personnel 
have the ability to block the purchase of Reloadit packs from a 
particular store or stores in our network and to delay funding 
for a cash transfer of money to a GPR card from an individual 
Reloadit pack. We have many documented incidents where 
Blackhawk's monitoring technology has successfully thwarted 
fraud attempts.
    Educating/Training Retail Partners. Although we have found 
Blackhawk's human resources and data analytics systems to be 
very effective in preventing victim-assisted fraud, we 
recognize that a critical backstop to our efforts is ensuring 
that our retail partners and their employees are attuned to 
potential fraud threats. We frequently issue fraud alerts to 
our retail partners on new and trending fraud scams and so that 
store employees can spot potential fraud at the point of sale. 
We also provide periodic webinar training for our retail 
partners on fraud and anti-money laundering awareness. At the 
individual store level, our merchandisers provide information 
to store employees when setting up card displays and restocking 
the racks on which our products are sold. We also train store 
employees to call our 24-hour toll-free risk support hotline if 
potential instances of fraud arise. We evaluate the efficacy of 
our retailer training by conducting ``secret shopper'' programs 
around the country.
    Ensuring Consumer Awareness. Of course, making sure 
consumers are aware of potential fraud threats is also an 
integral part of ensuring that they are not victimized. We have 
long included a ``Protect Your Money'' page on our Reloadit and 
PayPower websites explaining that the products can be the 
target of fraudsters looking to scam consumers. The page 
provides useful tips to prevent fraud and theft, a list of 
common scams involving Reloadit packs of which consumers should 
beware, links to government resources on phone scams and other 
types of fraud, and a toll-free number for consumers to call if 
they believe they are the target of a scam.
    More recently, we have added a conspicuous ``splash'' 
message to our Reloadit.com homepage that every customer will 
see before using the site to transfer funds or pay bills. The 
message instructs a consumer to refrain from providing the PIN 
number on the back of the Reloadit pack to anyone over the 
phone the consumer does not know or has not met in person. The 
message also identifies common scams and provides a customer 
service line for a consumer to call if the consumer has been 
asked by someone else to provide Reloadit as a form of payment.
    Coordination with Law Enforcement. Even as we work to 
educate retail partners and consumers about potential fraud 
threats, Blackhawk has also proactively engaged with law 
enforcement officials and regulators to detect and respond to 
new types of scams. Since October 2013, we have coordinated 
with the U.S. Secret Service and local law enforcement agencies 
from New York and New Jersey to combat phone scammers believed 
to be operating in New York and Florida. More recently, we have 
engaged with the U.S. Department of Homeland Security and the 
Treasury Inspector General for Tax Administration to address a 
fraud ring that has perpetrated a variety of victim-assisted 
frauds, including the ``grandchild in jail'' scam in which 
prepaid reload products have been implicated. We are committed 
to continuing open communication and coordination with law 
enforcement to prevent fraud and help hold accountable those 
who attempt to perpetrate fraud.

Ongoing Enhancements to Blackhawk's Anti-Fraud Regime

    The current option for Reloadit customers to open a 
Reloadit Safe or to use swipe at the register technology, 
coupled with our extensive technology and educational measures, 
exemplifies Blackhawk's commitment to preventing fraud against 
vulnerable populations and to deterring scammers from targeting 
the Reloadit pack as a useful vehicle to commit fraud. However, 
the implementation of these technologies and processes are only 
part of a progressive fraud mitigation strategy to prevent 
victim-assisted fraud targeted against seniors and other 
potentially vulnerable populations.
    We are pleased to announce today that by March 2, 2015, 
Blackhawk will implement important changes to the overall 
function of our Reloadit pack product. On that date, customers 
will still be able to buy a Reloadit pack at a store, but will 
no longer be able to use the quick load method to transfer 
funds to a GPR account. Instead, customers using a Reloadit 
pack will be required to create a Reloadit Safe that will store 
the Reloadit pack and will allow for the transfer of such funds 
from the Reloadit pack to the customers' GPR card or cards. To 
load funds to their GPR card or cards, consumers will purchase 
a Reloadit pack, go online to their Reloadit Safe, enter the 
user ID and password to open the Safe, and enter the 10-digit 
number found on the back of the Reloadit pack. The Safe will 
verify that the device ID used to open the Safe matches the 
device through which the Safe was created. This method is 
essentially the same account authentication process used by 
major financial institutions for mobile and online banking 
applications. The Reloadit Safe will require the customer to 
add a complete 16-digit GPR card number to the Safe to 
effectuate the transfer of funds to the GPR card.
    Further, Blackhawk will be enhancing the Reloadit Safe to 
allow us to monitor activations and activity based on the 
specific device (e.g., smartphone, tablet, computer) the 
customer uses to link to a Safe. In practice, this means that 
the customer will be identified by the device from which the 
customer is accessing the Safe and loading a GPR card. 
Customers will only be able to create one Safe per device. Once 
the device is used to create a Safe, that device will not be 
able to create another Safe. The enhanced Reloadit Safe will 
allow Blackhawk to intervene in possible fraud scenarios before 
funds are transferred from a Reloadit pack.
    Beyond this updated experience for the consumer, Blackhawk 
is implementing a variety of new security technologies behind 
the scenes to monitor suspicious activity related to reloading 
of GPR card accounts. We will use technology to associate a 
Safe with a ZIP code at the time of its creation and will 
monitor ZIP codes of the locations where associated Reloadit 
packs are purchased. ``Geographic Reasonability'' thresholds 
(based on the distance between the ZIP code associated with the 
Reloadit Safe and the ZIP code where the consumer purchased the 
Reloadit pack) will alert Blackhawk when Reloadit Safe accounts 
are funded with Reloadit packs activated from various parts of 
the country. Our advanced fraud monitoring systems will track 
the device identifier in real-time and will analyze velocity 
load limits based on customer behavior. Reloadit Safe 
transaction activity will also be monitored based on the 
history of the customer's use of the Safe. This data will help 
allow us track usage patterns and allow our Risk Department to 
identify suspicious activity and stop fraud (through contacting 
the retail store selling the Reloadit pack or by preventing 
loads and transfers). We will be able to blacklist accounts and 
users who appear to have engaged in excessive transfers or 
misused the product, and, each Safe will have daily transaction 
limits. Today, the daily load/spend limits are $2,850, with 
bill payment sub-limits set at $1,000 per day. The enhanced 
Safe features will allow us to impose lower limits on new 
users, new devices, and new Reloadit Safes that are opened. 
Further, Blackhawk will continue to impose risk-based funding 
delays to assist with money recovery if scams are somehow 
successful. These added layers of security will allow Blackhawk 
to control the movement of money to a registered GPR card 
account with an intensified level of security.
    We are also working with the retailers in our program to 
increase the availability of swipe reload capability for 
customers at the register. Although customers can currently use 
swipe technology at approximately 50 percent of all U.S. stores 
in our program that sell GPR cards, Blackhawk is working 
proactively with its retail partners to increase the number of 
swipe reload locations. We are pleased to announce that by the 
end of 2015, all of the retail locations in our program that 
sell these products will accept swipe at the register. While 
the conversion of in-store hardware to accept swipe reloads is 
an expensive undertaking for our retail partners, we believe 
that it is a worthwhile for them to provide consumers with 
another option for reloading their GPR cards and reducing 
instances of fraud.
    At the same time as Blackhawk is expanding the fraud 
prevention tools in Reloadit Safe and making swipe reload more 
available, we are also continuing to augment our efforts to 
educate customers and retail employees to spot potential 
victim-assisted fraud. We recently created and asked our retail 
partners to post signage in stores directing customers to 
refrain from providing the Reloadit pack PIN number to anyone 
they do not know and identifying common victim-assisted scams. 
In addition, we provided our retail partners a new guidance 
document for employees that outlines examples of scams 
targeting both customers and stores, as well as tips on how 
employees can protect their customers when confronted with 
suspicious situations. We are working with the National Adult 
Protective Services Association to broaden the reach of our 
education efforts to help reduce the amount of fraud committed 
against senior citizens using prepaid products, and, we are 
looking at additional opportunities to educated seniors and 
others about scams.

Conclusion

    We recognize that fraud cannot be totally eliminated. 
Combatting it takes vigilance. Working with our retail 
partners, law enforcement agencies, regulators, consumers, and 
others, Blackhawk has substantially improved its mitigation of 
victim-assisted fraud targeted at our customers. However, we 
are not satisfied. We are focused on and invested in preventing 
fraud from occurring, and in deterring would-be fraudsters from 
attempting to exploit our products for illicit uses. We are 
investing substantial human and financial resources to 
implement more layers of fraud protection and to adapt to ever-
changing threats. In addition to ensuring that all locations in 
our network that sell these products allow swipe reloads, we 
believe that our enhanced Reloadit Safe functionality further 
enhances both fraud prevention efforts and law enforcement 
tools for bringing fraudsters to justice. Thank you again for 
raising awareness about this important issue and for giving 
Blackhawk the opportunity to share our perspective.
 Testimony of Lisa LaBruno, Senior Vice President, Retail Operations, 
               Retail Industry Leaders Association (RILA)

    Chairman Nelson, Ranking Member Collins, members of Special 
Committee on Aging, thank you for the opportunity to testify at 
today's hearing regarding the role of the private sector in 
deterring phone scams targeting seniors. My name is Lisa 
LaBruno and I am the senior vice president of retail operations 
at the Retail Industry Leaders Association (RILA). By way of 
background, RILA is the trade association of the world's 
largest and most innovative retail companies. RILA members 
include more than 200 retailers, product manufacturers, and 
services suppliers, which together account for more than $1.5 
trillion in annual sales, millions of American jobs and more 
than 100,000 stores, manufacturer facilities and distribution 
centers domestically and abroad.
    The issue of senior's scams is unfortunately a growing 
problem and one that our members take seriously. I applaud the 
Committee for holding today's hearing on this important issue 
because we know that criminals are persistent and they will 
prey on anyone, including the elderly.
    At the onset, it is important to understand that our retail 
members carry tens of thousands of products in a given store, 
and that the vast majority of the time we do not produce, 
design, or manufacture these items. We rely on the expertise of 
our vendors to create great products that our customers want. 
At the same time, since we are closest to the customer and 
above all we value the relationships we have with them, we want 
to make sure, to the extent possible, that the products are 
being used safely, comply with all necessary Federal, State and 
local laws and regulations, and most importantly provide value 
to the customer.
    Today's hearing is focused on so-called ``reloadable pack 
cards,'' which are prepaid cards that have grown in popularity 
with our customer base. They provide a valuable service by 
transferring funds easily and affordably between two 
individuals. For example, parents may use them to transfer 
spending money to a college graduate backpacking through 
Europe; a grandparent could easily send birthday money to a 
grandchild off at school; and the unbanked or underbanked can 
use this product to pay utility bills or transfer money to a 
landlord for rent payments. According to statistics by the 
providers of these reloadable pack cards, over 99 percent of 
all transactions using these cards are for legitimate purposes.
    Unfortunately, these reloadable pack cards also appear to 
be just one of the latest mechanisms for fraudsters to con 
people, including the elderly, out of their money. In these 
unfortunate instances, a fraudster will dupe a victim into 
sending funds via one of these reloadable pack cards by 
tricking the victim into believing a loved one needs immediate 
financial assistance, that the victim's utilities will be shut 
off if payment is not made, that the money is needed as 
collateral in order for the victim to claim a large prize.
    There is no failsafe way that retailers can guarantee that 
these types of scams will never occur using these products. 
However, more can be done by all stakeholders, including law 
enforcement, the companies that design, manufacture and service 
these reloadable pack cards, and merchants, by providing 
consumer education, strengthening safeguards built into these 
products, and partnering with law enforcement to deter criminal 
activity on the front end, and arrest and prosecute criminals 
on the back end.
    While retailers are an important player in this process, we 
are only one link in this chain, and so we appreciate when our 
customers, law enforcement, pre-paid card vendors, regulators 
and Congress, bring to our attention areas of abuse. As 
responsive companies built on a foundation of trust with our 
customers, we want to see to it that we do our part to minimize 
the fraud that could occur on these transactions.
    Retailers have taken various steps to mitigate the risk of 
seniors falling prey to these scams including employee 
training, signage, and point-of-sale enhancements. For example, 
many retailers train their staff to identify signs of common 
scams in order to prevent the transaction from proceeding and 
protecting their customers from loss. Many of these reloadable 
products have large warning labels directly on the package 
warning customers about the dangers of giving the PIN to 
unauthorized users. Additionally, point-of-sale information can 
be used to educate customers about the dangers of fraudsters. 
POS enhancements have been installed to alert retailers and the 
reloadable card vendor to possible suspicious activity and to 
stop the transaction when certain thresholds are met.
    In discussing this issue with our member companies they 
were quick to share with us success stories and enhancements 
they are making on their own. One retailer provides an annual 
training for their employees focused on consumer fraud and 
elder abuse. This training identifies some of the common scams 
of which they are aware of and directs their colleagues to be 
on the lookout for red flags suggesting that a customer may be 
the victim a scam. If a colleague suspects a customer may be a 
victim of a scam, the colleague is directed to alert the 
customer to the risk of fraud and ask the customer to 
reconsider the purchase. This training has paid off. For 
example, an elderly Connecticut couple this past summer went to 
a store to purchase prepaid cards because they had been misled 
into believing their grandson was in police custody and 
directed to purchase prepaid cards to make a bail payment on 
his behalf. A colleague warned the couple of the risk of scams, 
and the couple did not proceed with the purchase after 
confirming with the police that their grandson had not been 
arrested. A store in Rockland County, NY, prevented a similar 
scam against a senior customer who believed the IRS told her to 
purchase prepaid cards to pay off back taxes. In addition to 
employee training, this store has also posted signage at all of 
its prepaid card displays advising customers to be aware of 
such scams. These are just a few of the many examples of what 
retailers are doing to protect their customers.
    However, despite our best efforts, unfortunately people can 
always fall victim to scams of any kind. Recently, we were made 
aware that two of the largest providers of these reloadable 
pack cards--GreenDot and InComm--have announced plans to pull 
their product from store shelves by the end of first quarter of 
2015. We fully expect that all RILA members will comply with 
this deadline, and, we have also been made aware that a third 
provider of these products--Blackhawk--plans to enhance the 
security aspects of its reloadable pack cards; we look forward 
to learning more about the modifications Blackhawk is making.
    I want to make one thing clear--it is not RILA's role to 
stand between the relationships that merchants have with their 
vendors, and so we look forward to seeing what types of 
innovative new products will come into the marketplace that 
will satisfy our customers' demand for these services, while 
enhancing the security of these transactions.
    Finally, we must make sure that law enforcement has all the 
resources and tools necessary to combat these crimes. It may be 
appropriate for Congress to examine whether the laws on the 
books today are sufficient to act as a deterrent for criminals 
engaging in this behavior in the first place.
    In closing, RILA appreciates the opportunity to testify 
before the Committee on this important issue. We want to work 
with you, our suppliers and partners in law enforcement to 
enhance the security of these products, while still filling a 
need in the marketplace. Thank you and I look forward to 
answering your questions.  
      
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                       Statements for the Record

=======================================================================
   
         Statement of Senator Susan M. Collins, Ranking Member

    Chairman Nelson, before we get started, I would like to 
take this opportunity to thank you for the extraordinary 
leadership you have provided this Committee these past 2 years. 
The never-failing courtesy you have shown to me and my staff, 
to the other members of the Committee, and to all who have 
testified before us has truly been the hallmark of your tenure 
as Chairman. Our achievements as a Committee trace directly to 
the bipartisan tone you set, and the spirit of comity and 
cooperation that have prevailed as a result.
    Your high standards have carried over to your staff as 
well, and I would be remiss if I did not thank them also for 
all of the hard work they have done on behalf of the Committee.
    It is fitting that the last hearing you and I will lead as 
Chair and Ranking Member examines once again the problem of 
scams targeting America's seniors, and how to stop them. This 
incredibly important topic has rightly been the focus of more 
of our hearings in the past 2 years--eight, counting today--
than any other issue we have explored together as a committee.
    Our work on this topic began with a hearing early last year 
on the notorious ``Jamaican Phone Scam,'' run by sophisticated 
criminal gangs operating out of boiler rooms in Jamaica. Before 
our hearing, these con artists placed an estimated 30 thousand 
phone calls every day to victims in the United States, and 
stole an estimated $300 million each year from tens of 
thousands of American seniors.
    As a result of our hearing, the Jamaican government finally 
reformed its laws to target the scammers, and Federal 
prosecutors have since indicted dozens of individuals on 
conspiracy charges for their participation in these scams.
    One common theme that has emerged from these hearings is 
the role played by prepaid debit cards. It is difficult to say 
exactly how much money Americans lose through scams involving 
prepaid debit cards, since many victims don't report their 
losses. The Federal Trade Commission, however, says that 
Americans reported losing nearly $43 million through prepaid 
debit card scams last year alone. Because these cards are 
widely available and convenient to use, and because money 
transferred using them is untraceable, prepaid debit cards have 
become the monetary tool of choice for scammers.
    This is especially true for cards that can be ``reloaded'' 
with money, which have a unique PIN that customers can use to 
transfer funds. In the typical scam, the con artist will 
pressure the victim into purchasing reloadable cards, putting 
money on the card, and then sharing the card's PIN with the 
scammer. Armed with the PIN, the scammer can transfer the money 
to his or her own prepaid debit card account and then access 
those funds from an ATM, through PayPal, or even by buying and 
reselling consumer goods on Internet auctionsites.
    There are many legitimate reasons why consumers would want 
to use prepaid debit cards, and I note that these cards are 
especially important to lower-income consumers who may not have 
access to traditional banking services. Still, it is important 
that we understand what can be done by card providers and 
retailers to make it harder for criminals and con artists to 
use these cards to advance their nefarious schemes.
    The witnesses who are testifying before us today will 
describe the actions some prepaid debit card companies and 
retailers have already taken to push back against the scammers, 
including phasing-out PIN-based reloadable cards and issuing 
prominent warnings to customers to be on their guard against 
fraud. Some retailers have also joined the battle by training 
their sales clerks on what to do when they spot customers who 
are engaging in suspicious transactions with prepaid cards. I 
appreciate the willingness of the witnesses to describe these 
efforts, and I look forward to their testimony.
    Mr. Chairman, before the witnesses begin, allow me to thank 
you again for your leadership of this Committee. Although we 
will be serving in different capacities next session, I am 
confident we will have the opportunity to continue our work 
together to protect America's seniors.

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