Pasadena-based Green Dot at Center of Tax Refund Fraud Prevention Efforts

Pasadena-based Green Dot Corporation is trying to prevent tax refund fraud and carefully examining all tax refund transactions that are processed via its prepaid card products, a report by the Associated Press said last week.

The report said thousands of people across the U.S. have had their prepaid cards frozen when they directed their tax refund to their account, and this has been the effect of efforts by the financial industry to fight an increasing number of tax fraud cases.

A number of consumer organizations have posted complaints about frozen prepaid debit cards, many of them caused by tax refund being deposited into their card accounts. The complaints mentioned not only Green Dot but also numerous other debit card providers in the U.S.

Green Dot has apologized, says the Chicago Tribune report, but added the delays are a result of their having to carefully scrutinize every tax refund before crediting it to the card, to make sure the transaction isn’t fraudulent.

Green Dot, considered the biggest prepaid debit card issuer, estimates 9,000 of their customers have had their accounts blocked this tax season, representing 0.2 percent of their customers, according to the Tribune report.

Green Dot also issues WalMart’s prepaid shopping card which also been affected by consumer complaints of tax refunds being put on hold.

Most of the complaints said card users have been asked to re-verify their identities with Green Dot, which apparently has been victimized by hackers depositing other people’s tax refunds to their prepaid cards, using stolen information.

Earlier, the Internal Revenue Service issued circulars warning of a wide range of tax scams this season, including a phishing scam where hackers are able to get employee W2 information and use this to steal Social Security Numbers to file fake tax returns.

Last year, the IRS held a summit with states and tax-industry representatives to find ways to solve the problem together. The IRS said it is now working with banks and debit card issuers to help detect and prevent fraud.