NetSpend Corp. deceived consumers about debit card funds, FTC says
NetSpend, a prepaid debit card, is advertised as “Money a new way. A better way,” better than a bank and safer than cash.
The problem is, the Federal Trade Commission said Thursday, is that many of the consumers who had funds directly deposited to the cards could not access their money for weeks, and sometimes never. This lead to severe financial hardship such as evictions, car repossessions and late fees on bills.
According to the FTC’s complaint, NetSpend tells consumers that its reloadable prepaid debit cards offer an alternative way to store and immediately access their funds.
But once people have loaded funds onto the cards, many of them find they cannot access their money, either because NetSpend denies or delays activation of the card, or because it blocks consumers from using it, the FTC alleges.
NetSpend intends to vigorously contest the complaint and has substantial defenses to do so, the company said Thursday.
“At issue in the complaint is whether consumers were deceived because of NetSpend’s compliance with federally mandated obligations under the USA PATRIOT Act to confirm the identity of those acquiring NetSpend prepaid cards,” the company said in a statement.
“NetSpend takes seriously and carefully adheres to these legal mandates to fight identity theft, money laundering and terrorist financing and believes that no one was deceived or harmed by the company’s compliance with these legal obligations,” the company said.
The FTC seeks to return consumers’ funds and ensure that NetSpend provides them with 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.”
NetSpend is based in Austin, Texas, and has corporate offices in Atlanta. It is a subsidiary of TSYS (NYSE: TSS).