Over the past week, general purpose,reloadable prepaid cards have taken a beating in the press and inthe public eye. Florida Attorney General Pam Bondi announced on May19 that she had subpoenaed records from First Data Corp., Green DotCorp., AccountNow, Inc., NetSpend Corp., and Unirush FinancialServices, LLC. She is looking for evidence that the companies mayhave charged hidden fees and misled consumers about how muchprepaid cards could help them rebuild their credit scores.
Shortly thereafter, an opportunistic San Francisco law firm,Robbins Umeda, LLP announced that it has launched “investigations”into NetSpend and Green Dot “for shareholders” to determine whetherit might file class action lawsuits against the two companies. In apress release, the firm said it wants to figure out whether”directors and officers of Green Dot harmed the company bybreaching their fiduciary duties to shareholders by causing orpermitting the company to engage in deceptive and unfair consumerpractices.” It makes a similar statement about NetSpend. Noshareholders have requested these “investigations” as near as canbe determined from publicly available sources, but this representsthe danger the prepaid industry faces as sharks smell blood in thewater.
It is all but certain that if the Florida investigation turns upany violation of state law, there will be 49 other attorneysgeneral that will follow Bondi’s lead and begin looking forviolations of laws in their states. In addition, if lawsuits end upbeing filed for shareholders, cardholders will likely file lawsuitsof their own.
Whatever the outcome, another case still needs to be argued in thecourt of public opinion. If prepaid cards are all tarred with thesame brush, it will become very difficult for companies andconsumers to make use of prepaid cards regardless of how fairlytheir programs are constructed.