MasterCard and RushCard will pay out $10 million to consumers for 2015 fiasco

MasterCard and RushCard must pay $13 million to wronged consumers and the CFPB. Source: Reuters
MasterCard and RushCard must pay $13 million to wronged consumers and the CFPB. Source: Reuters

On Wednesday, the Consumer Financial Protection Bureau (CFPB) announced that it had ordered UniRush and MasterCard (MA) to pay $13 million in restitution to consumers and punitive fines.

In October 2015, UniRush’s RushCard, a prepaid card co-founded by Def Jam mogul Russell Simmons, transitioned to a new payment processor—MasterCard. The transfer was botched, locking out thousands of people from their accounts, cutting them off from their only banking system, as many prepaid card users are shut out by traditional banks. For some consumers, it would be weeks until their funds could be accessed.

“Mastercard and UniRush’s failures cut off tens of thousands of vulnerable consumers from their own money, and threw some into a personal financial crisis,” CFPB Director Richard Cordray said on a press call, adding that consumers couldn’t use their own money to pay for basic living expenses and necessities. “Many RushCard users are unbanked—meaning they do not have a traditional bank account and often are economically vulnerable.”

At the time of the fiasco, around 270,000 of RushCard’s 650,000 users received direct deposit from their job via the service, and 45,000 of them saw delayed deposits. Another 2,000 saw deposits that were never processed and returned. Unable to access their money, Cordray said many of these people encountered late fees, penalties, and other hardships as a result. An additional 1,110 customers couldn’t even withdraw the money that had already been in the accounts because of the new system.

“All of this stemmed from a series of failures that should have been anticipated and prevented,” said Cordray, noting that RushCard’s advertising says it can get consumers their wages or benefits “up to two days sooner.”

Further issues were reported: Incorrect balances of $0 on funded accounts, double deposits showing inflated balances, and a lack of customer service during the chaos.

As a result, MasterCard and UniRush will pay $10 million in restitution to consumers, and $3 million into the CFPB’s Civil Penalty fund. “Based on our investigation, we determined that both UniRush and Mastercard acted unfairly by failing to properly prepare for the change in processors and failing to adequately test the new system,” said Cordray. “Also, UniRush’s handling of cardholder accounts after the changeover caused consumers substantial harm.”

There’s no timeline on when exactly the restitution will be paid out, but wronged consumers will not have to do anything to collect it; affected customers will get $100 for delayed deposits and $250 for returned deposits. Consumers with multiple issues will be paid per issue, and the money will come back either as a credit or as a check for those who canceled their accounts post-fiasco.

Already, RushCard had agreed on a $19 million settlement to pay those affected $100, which is unrelated to the CFPB order.

In statements to Yahoo Finance, MasterCard and UniRush expressed satisfaction that the matter had been resolved. “We are pleased to bring this matter to a close, allowing us to further enhance the best practices, policies and procedures for prepaid cards at our Payments Transactions Services business,” a MasterCard spokesperson wrote. A UniRush spokesperson told Yahoo Finance: “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.”

Russell Simmons, gave Yahoo Finance an additional statement as well: “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.”

On the call, some reporters wondered about the timing of the flurry of recent enforcement actions—perhaps looking for a Trump connection, as speculation as to the agency’s survival during the new administration mounts—or the Jan. 30 sale of UniRush to Green Dot (GDOT). “January tends to be a busy month for us,” said Deborah Morris, Deputy Enforcement Director at CFPB.

Concluding his remarks Cordray gave a pointed warning to prepaid card providers: “Going forward, we are putting the prepaid industry on notice that companies will face the consequences if consumers are denied access to their money or to the services they pay for and on which they have the right to depend.”

Ethan Wolff-Mann is a writer at Yahoo Finance focusing on consumer issues, tech, and personal finance. Follow him on Twitter @ewolffmann.

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