RushCard, the Russell Simmons-backed prepaid debit card company, will pay millions to settle charges relating to a system failure that "cut off tens of thousands of vulnerable consumers from their own money," the federal consumer financial regulator said Wednesday.
The Consumer Financial Protection Bureau ordered Mastercard and RushCard parent UniRush, to pay $3 million in penalties and $10 million in compensation to customers affected by the failure. UniRush settled a civil lawsuit over the outage for $19 million in May, 2016.
RushCard customers lost access to their money for over a week in October, 2015, due to a system failure connected to the company's transition to Mastercard's payment processing system. RushCard parent UniRush, founded by hip-hop mogul Russell Simmons, announced this week that it is being sold to prepaid card company GreenDot for $147 million.
“The companies must set things right for consumers and make sure such devastating service disruptions are not repeated,” Cordray said.
A CFPB official said that RushCard users who experienced delayed deposits will get $100 and those who had deposits returned will get $250. UniRush will be responsible for making the remediation payments, the CFPB official said. The refunds will either be credited to customers who are still with UniRush; others will receive a check.
“The RushCard fiasco stopped people from accessing their money to buy food and pay rent. The CFPB’s action will put $10 million back in the pockets of working families struggling to make ends meet." the National Consumer Law Center, a consumer rights nonprofit, said in a statement.
Of UniRush's 650,000 active customers, about 270,000 received some for of direct deposit on a RushCard. The CFPB put the number of customers affected and who will receive restitution in the "tens of thousands."
The RushCard fiasco generated nearly 1,000 consumer complaints to the CFPB. When the transfer happened, some customers were left behind or had their accounts suspended and did not receive replacement cards, the regulator said. For another 45,000 customers, direct deposits were delayed and for another 2,000 customers they were processed or got returned.
"RushCard welcomes our settlement with the CFPB. We maintain that our company did not engage in any wrongdoing, and do not admit to such in our Consent Order with the CFPB," a RushCard spokesperson said in a statement. "We believe we have fully compensated all of our customers for any inconvenience they may have suffered through thousands of courtesy credits, a four-month fee-free holiday and millions of dollars in compensation."
“This incident was one of the most challenging periods in my professional career. I cannot thank our customers enough for believing in us, remaining loyal and allowing us to continue to serve their needs," Simmons said in a statement.This is not the first time UniRush has had to pay up for the RushCard fiasco. The company reached a $19 million settlement with affected customers in May of last year.
When reached for comment, a GreenDot spokesperson pointed to the company’s release announcing the UniRush acquisition that any “regulatory obligation” from the October 2015 incident “will belong to [UniRush]” and Green Dot “will be indemnified through a cash escrow reserve, funded by [UniRush]."
"We are pleased to bring this matter to a close," Mastercard said in a statement, "allowing us to further enhance the best practices, policies and procedures for prepaid cards at our Payments Transactions Services business."
This story has been updated with comments from GreenDot and RushCard spokespeople as well as the National Consumer Law Center.