Rossen Reports

Cash-for-phone ATMs may fuel violent crime, top cop says

May 23, 2013 at 7:32 AM ET

Video: New machines popping up in malls across the country enable you to trade in a used cellphone for cash. Some law enforcement officials say the ATMs are making it easier than ever for criminals to profit off your stolen phone. NBC’s Jeff Rossen investigates.

Thieves targeting your cellphone. Now, some officials say, a machine popping up in malls across the country is helping criminals. TODAY National Investigative Correspondent Jeff Rossen reports.

It sounds like a great idea: An ATM where you can trade in your used cellphone and get instant cash for it. But now some police say these machines are making it easier than ever for criminals to profit off your stolen phone.

What to do if your cell phone is stolen

They strike without warning: Thieves snatching cellphones right out of your hands, some victims even getting beat up. Now, a top cop says these machines are fueling the violence. "It's a motivator for the criminal element," Cathy Lanier, Washington, D.C., police chief, told us.

Know a scam? Been ripped off? Click here to email Rossen Reports.

They're called ecoATMs: kiosks that recycle your used cellphone. There are more than 400 of them in shopping malls across the country.

Here's how they work. Put your phone in a bin: The machine scans it for market value, and then gives you cash right on the spot. But critics say these machines are driving thieves to steal more phones for a quick payout.

"I can knock you down and steal your phone, find an ecoATM, I can get up to $300 in cash for that phone," Lanier told us.

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It happened to Suzi Woodruff Lacey. A thief stole her iPhone right from her purse. She used an app to track it down, found it at a mall inside an ecoATM, and got it back. "The ecoATM made it so easy for thieves," she said. "I mean, it's a magnet for thieves."

In fact, police say stolen phones have turned up inside ecoATMs nationwide, from Georgia to Texas to California. The company says it has a system to keep criminals away: First, scanning the person's driver's license, then taking a photo of them.

"And we have a team of people who verify in real time that the person who is standing in front of the machine is the person who's placed in their license," said Ryan Kuder, director of marketing, ecoATM.

"What happens if the person in front of the machine isn't the same person as the license?" we asked him.

"We deny the transaction," Kuder said.

But we found that not always true. We sent two NBC producers who look nothing alike to ecoATMs in two New Jersey malls. We had one producer use the other's ID to cash in a phone. The person in the ID clearly wasn't her, yet the machine still took the phone and spit out the money.

We got the same result at another ecoATM. Remember, the company makes money off these phones. We shared our findings with them. "Does this look like the same woman to you?" we asked Ryan Kuder.

"No, it does not look like the same woman to me," he said.

"What if I told you that this woman went up to one of your machines and used her ID two of your machines, actually."

"Well, I would say that it would appear that we missed that one," Kuder admitted. "But here's what we do do: We go and we look at these transactions, and we learn from each transaction that we do."

"If we found this in one day, who's to say this is not happening at a lot of your kiosks in a lot of different states every day?" we asked.

"Well, we work very, very hard to make sure that it's not," Kuder replied.

Kuder said that out of every 10,000 phones bought, ecoATM discovers five are stolen, and those are returned. But Washington, D.C., police say they're finding a lot more than that, tracking at least 200 stolen phones to these machines.

ecoATM says it also provide photos, fingerprints and phone serial numbers that have helped police make arrests. "We're collecting more information about these people that are selling phones than anybody else," Kuder said.

Police in D.C. say they've made six arrests so far. But Chief Lanier wants to prevent these crimes altogether, and says giving instant cash for phones only encourages the thieves.

"Working with us after the fact we appreciate that. Don't get me wrong," Lanier told us. "But that doesn't help the person who's just had their jaw broken for their phone."

The company says that because of our investigation, they're now taking a second look at their ID verification system, and looking for ways to improve the technology, and employee training.

If your phone is stolen: Report it to the police and your wireless carrier immediately. Police say it’s helpful to have your phone’s serial number, a unique identifier called a IMEI or MEID, to track down the phone.

If you have an iPhone, you can find instructions for retrieving your serial number on Apple’s support page. For other types of devices, contact your wireless provider. If your phone is stolen and you don’t have the serial number, you can always get it from your wireless carrier.

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