The lawsuit turns on the fact that Walmart provides a host of financial services to customers at its stores, including money transfer services in which people can send money to friends and family in other countries. The retailer in recent years has sought to increase such financial services at its stores.

The money-transfer services at Walmart are offered through other companies, including MoneyGram International, Ria and Western Union, and processed by Walmart employees, sometimes under a Walmart brand, such as “Walmart2World,” the federal agency said in its press release regarding the lawsuit.

“While scammers used its money transfer services to make off with cash, Walmart looked the other way and pocketed millions in fees,” said FTC Bureau of Consumer Protection Director Samuel Levine in the release. “Consumers have lost hundreds of millions, and the Commission is holding Walmart accountable for letting fraudsters fleece its customers.”  

The lawsuit was filed Tuesday in U.S. District Court in Northern Illinois, and seeks civil penalties under the Telemarketing Sales Rule as well as refunds for monetary losses and related damages.

The retailer denied the agency’s charges and questioned the FTC’s conduct. “This lawsuit is factually misguided and legally flawed and Walmart will defend against it aggressively,” Walmart Spokesperson Randy Hargrove said in a statement. He also noted that the retailer had sent a Freedom of Information Act request to the agency recently and attached that June 3 letter, which said that the agency’s investigation had been “riddled with a lack of transparency and a host of procedural irregularities.” 

The FTC said that from 2013 to 2018 about $197 million in such transfers through Walmart were the subject of fraud complaints, and more than $1.3 billion related payments were also possibly connected to the fraud, based on information from fraud databases maintained by MoneyGram, Western Union and Ria.

The agency hasn’t spared those money transfer providers either. The FTC has brought actions against MoneyGram and Western Union in recent years. In April, the Consumer Financial Protection Bureau and New York Attorney General Letitia James also filed a civil lawsuit against MoneyGram International for allegedly repeatedly violating consumer financial protection laws.

In the lawsuit, the FTC said that Walmart didn’t have a “written anti-fraud or consumer protection program until November 2014” and that the retailer “failed to have an effective program or violated its own policies, as well as the policies of its partners” that were aimed at protecting consumers.

The agency also alleged in the lawsuit that not only did Walmart fail to properly train its employees handling the money transfers, some of its workers engaged in the fraud.

The commission decided to pursue the civil penalties against Walmart in a 3-2 vote. In a Tuesday statement, the retailer pointed to that thin margin as another sign of a flawed action.

By Lynne Marek on June 29, 2022
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