Prepaid Card Company Charged with Deceptively Marketing Reloadable Debit Card
Company accused of deceiving consumers about access to funds
The Federal Trade Commission (FTC) is accusing prepaid card company NetSpend Corporation with deceptively marketing reloadable debit cards.
The agency claims that NetSpend deceived its customers—many of whom do not have a bank account—regarding access to funds deposited on the company's debit cards.
The complaint alleges that the defendants tell customers that NetSpend's reloadable prepaid debit cards offer a different method of storing and immediately accessing their money. However, once consumers load money onto the cards, many discover that they cannot access their money for one of two reasons, claims the FTC: either NetSpend denies or delays card activation, or it blocks the customer from using it.
The FTC is seeking to return customers' money and make sure that NetSpend gives them the promised access to their funds in the future.
"Innovative financial products can offer many benefits to consumers. However, when companies promise consumers 'immediate access' to their funds, they need to honor those promises," said Jessica Rich, Director of the FTC's Bureau of Consumer Protection. "We're committed to protecting consumers – particularly those who are financially strapped – from deceptive practices involving their payment choices."
In its complaint, the FTC alleges that the company claims in marketing materials and on its website that those who buy its debit card will be able to "use it today," will have "immediate access" to their funds, and that their money is "always available." NetSpend also claims that its customers are "guaranteed approval" for a card. In reality, claims the FTC, many customers did not get access to their money as they were promised. The consumers have to go through an identity verification process in compliance with the law before the debit card may be activate, and many have trouble fulfilling this requirement. Many who were not able to access their money for weeks, if at all, suffered severe financial hardships like evictions, repossession of vehicles, and late fees on bills, the complaint alleges.
The agency further claims that customers who closed their accounts and asked for refunds waited several weeks to receive their money, while in other cases customers' money was allegedly depleted by fees charged by NetSpend.
NetSpend, says the FTC, misrepresents that when consumers dispute charges on their debit cards, it will grant them provisional credits so they are able to access their money while the error is being resolved; however, in many cases, the company did not grant the provisional credits as promised.