NetSpend Corporation, a prepaid card company, was charged by the federal Trade commission for deceiving customers; many of whom who do not have bank accounts,about access to funds deposited on defendants’ debit cards.
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. Once people have loaded funds onto the cards, however, 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. 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.”
According to the FTC’s complaint, NetSpend claims in marketing materials and on its website that consumers who purchase the NetSpend card can “use it today,” that they will have “immediate access,” for a card. In fact, the FTC alleges many consumers did not receive access to their funds as promised. According to the complaint, consumers must go through an identity verification process as required by law before the prepaid debit card can be activated, and many people have difficulty satisfying this requirement. According to the complaint, many consumers who could not access their funds for weeks – or at all – suffered severe financial hardships such as evictions, car repossession, and late fees on bills.
In addition, the complain alleges that NetSpend misrepresents that when customers dispute charges on their cards, it will grant provisional credits so they can access their funds while the error is resolved. In many vases, however, NetSpend has failed to grant provisional credits as promised.