Prepaid card provider RushCard has agreed to pay $19 million to cardholders affected by its October outage and $1.5 million towards attorney fees.
RushCard, a prepaid card created by hip-hop mogul Russell Simmons, faced technical issues last October while it was transitioning to another payment processor. The glitch left more than 132,000 customers unable to access their accounts for several days. Some cardholders said they had transactions rejected or that they fell behind on bills.
The outage led to renewed indictments of prepaid cards, which are an important financial access tool for those who cannot get or do not want a regular bank account. The glitch, which was technical in nature, also led the Consumer Financial Protection Bureau to announce that it was investigating the prepaid processing business and whether or not it should be included in the comprehensive prepaid rules that it has been working on for over two years.
The delay in the prepaid rules is likely due to what amounts to a technical problem that could affect debit, credit, or prepaid cards. In fact, industry players have said that they have seen similar problems with processor conversions for debit and credit cards. The difference is that most people have some kind of back up card for their credit or debit cards and would not face the same level of disruption in their lives.
Another puzzling aspect to this is the assertion by some commenters that RushCard somehow stood to gain from denying cardholders access to their funds. Program managers only get paid when their customers can actually use their cards. RushCard not only lost money in this settlement and in its fee holidays, but also during the outage itself. The problems that RushCard’s customers faced were not the result of some nefarious scheme to wring money out of them. They were a technical fault that ended up hurting all the stakeholders involved.
Overview by Ben Jackson, Director, Prepaid Advisory Service at Mercator Advisory Group
Read the full story here
