Prepaid Card Company NetSpend Delayed Consumer Access to Money for Weeks: FTC

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Prepaid Card Company NetSpend Delayed Access to Money for Weeks: FTCManaging your finances isn’t easy without a checking account. That’s why many consumers who don’t have one turn to prepaid cards. They can load them with money and use it in place of a regular debit card. Unfortunately for many customers of NetSpend, the FTC says this tool that should have made consumers’ financial lives easier only made things worse.

What NetSpend Allegedly Did Wrong

According to the FTC, NetSpend:

  • Offered “guaranteed approval” for their prepaid cards when, in fact, the approval process required (by law) identity verification that not every applicant could fulfill
  • Told consumers they could have “immediate access” to their funds that were “always available” when, in fact, some NetSpend customers weren’t able to access their funds for weeks
  • Failed to provide promised provisional cards to customers who were waiting on resolution of disputed charges
  • Took weeks to refund customers who cancelled their cards

Instead of helping with their finances, the FTC says NetSpend prepaid cards made it harder for some customers to pay their bills, resulting in late fees, car repossessions, and evictions from their homes.

For these alleged violations, the FTC wants NetSpend to return consumers’ funds and take steps to ensure their money is readily available in the future.

New Prepaid Card Rules

This news from the FTC comes on the heels of prepaid card rules recently finalized by the Consumer Financial Protection Bureau (CFPB). As I blogged in October, starting next year prepaid card holders can expect the following federal consumer protections:

1) Free access to your account balance, transaction history, and fees you’ve been charged

2) Requirement that prepaid card issuers investigate and resolve reported errors

3) Consumer liability limited to $50 in the event a prepaid card is lost or stolen (provided the consumer reports the loss to the credit card issuer)

4) Use of short- and long-form disclosures outlining all applicable fees

5) Publicly available card agreements

6) New rules applicable to credit products associated with prepaid cards

Learn more about how new rules make prepaid cards better.

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