Prepaid Credit Card Scams On Rise, Canadians Losing Millions

Posted: Updated:

Fraudsters have found a quick, convenient, and easy-to-disguise way to swindle cash out of unsuspecting Canadians: they demand their victims pay up using prepaid credit cards.

"The [financial] loss is just incredible. There's just so much of this happening," says Robert Rochefort with the Canadian Anti-Fraud Centre. ​

Sometimes scammers call saying you owe money to the tax man and if you don't pay now, you're going to jail. Another scenario: your son was in a car accident and if you don't send money immediately, he's going to jail.

Then they instruct their victims to pay via prepaid cards, a type of credit card with a set amount of funds that are purchased in stores and used for transactions like buying goods online and paying bills.

Fraudsters direct victims to give them the numbered codes on the cards, giving them access and — poof — the money is gone.

Scams swamp police

Windsor, Ont., police report prepaid card frauds have surged over the past two years. "We're dealing with it on a constant basis," says Const. Robert Durling of the department's fraud unit.

He says just weeks ago, an elderly couple was scammed out of $16,500. They got an alarming call from someone posing as their son, claiming he'd been in a car accident in the Dominican Republic.

Then people impersonating a lawyer and a police officer took the phone, stating the son had been charged with criminal negligence.

The couple was told they needed to immediately send money via prepaid Visa Pivot cards to cover costs and keep him out of jail. The criminals instructed them to provide the numbered codes on the back of the cards.

"That's why [scammers] like these cards. It's quick. In this case, they money was transferred within an hour, it was gone," says Durling.

Scammers cover tracks fast

Fraud analyst Rochefort explains that once fraud artists gain access to the cards' codes, they are able to move the funds to another card, making it difficult to follow the money.

"You can continuously transfer [funds] from one card to another card to another card to hide your trail," he says.

Rochefort notes that since the beginning of 2014, the Canadian Anti-Fraud Centre has received 1,330 complaints from victims of prepaid card scams. The financial loss totals more than $3 million.

He cautions the statistics are just a drop in the bucket because only about five per cent of victims actually contact the centre.

The CRA prepaid card scam

"I understand why the fraudsters do it. It's easy money, a lot easier than robbing a bank," says Gary Tomic.

A few weeks ago, a close relative of Tomic's in Kitchener, Ont., lost more than $5,000 in a prepaid card scam. CBC News is withholding the victim's name for privacy reasons.

Tomic's relative was resolving a dispute with the Canada Revenue Agency when she suddenly got a call from someone impersonating a CRA agent.

He informed her she owed tax money — the exact amount that the real CRA had said she owed. He also somehow knew about her correspondence with the agency.

Because the caller had personal details, the relative found the scam believable. The fraudster also threatened her, stating "unless you pay it right now, you're going to be arrested," explains Tomic.

His relative was then directed to pay the debt with prepaid PayPower Visa cards. After purchasing more than $5,000 in cards, she was instructed to call the fraudster back and provide the card numbers. She then had to mail the cards to what appeared to be a CRA address.

Tomic believes mailing the cards was just a stunt to make the scam appear legitimate. Once the scammers got the cards' numbers over the phone, "boom, they emptied [them] immediately."

Who's responsible?

A frustrated Tomic wants more controls to help prevent this type of scam. He'd like to see a 24-hour wait period before prepaid cards can be activated.

Visa told CBC News in an email that such a feature wouldn't fly because "the immediate access to funds is part of the convenience that customers want in prepaid cards."

Visa also said that it offers "a layered approach to security that helps protect the payment cardholders." But the company added that "cardholders also need to be wary of fraud" and protect their card information.

David Eason, chair of the Canadian Prepaid Providers Organization, said in a statement that the potential for scams exists with all payment products and that "the prepaid industry works consistently to combat that fraud."

Tomic also wants retailers to take some responsibility such as limiting how much customers can spend on cards. "I'm not sure why they're even selling it when it's so ripe for fraud," he adds.

Tomic's relative bought her cards at two Sobeys grocery stores in Kitchener. Sobeys tells CBC News it has been in touch with Tomic and "regrets" what happened to his relative.

Spokeswoman Vicki Leung said in an email that as a result of the growing fraud, "our stores have enhanced their processes" to help combat the scam. She added she couldn't give details because that would tip off fraudsters.

Tomic has decided the best he can do now is create awareness by telling his family's story so that other victims might be spared.

"It's not likely we'll get any [money] back here, it's more, how do we help others so they don't have to experience this."

Also on HuffPost:

Best Credit Cards In Canada, 2014
Share this
Current Slide

Also on HuffPost:

Suggest a correction

Around the Web

Credit Card Interest-Rate Scam Refuses to Die - NBC News

5 Ways Thieves Steal Credit Card Data |

Robocall Credit Card Interest Scam Continues to Plague Consumers

Seventeen Millennials Arrested as Police Bust Elaborate Credit Card Scheme