CFPB Sues Prepaid Card Servicer, Payment Processor $13 Million
Tue 07 Feb, 2017 / by McIntyre & Lemon / Client Alerts
02/07/16 – The CFPB has taken action against a multinational financial services corporation and a prepaid card servicer for breakdowns that left consumers unable to access their funds.
The defendants’ prepaid card is advertised as a way for consumers to get direct deposits on their card “up to two days sooner.” These deposits include government benefits or payroll funds. In 2014, the prepaid card servicer chose the global financial services corporation as its new payment processor. Both companies spent 13 months preparing to switch to the corporation’s processing platform, which ultimately took place Oct. 10-12, 2015. At the time of the switch, the prepaid card service had about 650,000 active users, of which about 270,000 received direct deposits on their prepaid card. The switch led to problems that prevented consumers from accessing their funds.
The CFPB received about 830 consumer complaints from the prepaid card service’s users in the weeks that followed the switch in payment processors. By comparison, the CFPB received 147 complaints about prepaid cards from November 2014 to January 2015. According to the CFPB, as a result of the failures, the card servicer and the payment processor:
- Denied consumers access to their money: The prepaid card servicer did not accurately transfer all accounts to the payment processor. This led to consumers being unable to access their stored funds on the cards. The card servicer also delayed issuing replacement cards for lost or stolen cards.
- Failed to process deposits and payments: The card servicer delayed crediting funds from direct deposits and government benefits to consumers’ accounts. The card servicer also double posted deposits, which led consumers to believe that they had a larger balance in their account than they actually did.
- Gave consumers inaccurate account information: The payment processor said that some consumers’ accounts had a zero balance when in fact the account had some stored funds.
- Failed to provide customer service to consumers impacted by the breakdowns: The card servicer did not have enough customer service staff to handle the increased inquiries from consumers due to the breakdown. As a result, consumers waited for customer service for hours.
The CFPB has ordered the defendants to pay an estimated $10 million in restitution to tens of thousands of harmed customers. The defendants must also pay a civil money penalty of $3 million to the CFPB Civil Penalty Fund.