The Federal Trade Commission filed a lawsuit against NetSpend on Thursday, alleging that the prepaid card issuer deceived consumers in its advertising.
NetSpend, which is a division of Total System Services, responded that it intends to "vigorously contest" the lawsuit.
The case hinges on whether NetSpend crossed any legal lines in its advertising materials, which marketed the idea that getting approved was easy and funds would be available right away.
One online advertisement cited by the FTC claimed "Guaranteed Approval." But if consumers clicked on a footnote next to that text, they were shown additional language that described a federally mandated identity-verification process.
"'Guaranteed Approval' is contingent upon passing this mandatory identification conformation,'" the footnote read.
Another ad cited by the FTC includes a photo of a woman and child below the text, "My government benefits payment is direct deposited every month and I have instant access to my money — no holds, no waiting."
Elsewhere in the ad is the text "Immediate access to your funds," alongside another footnote about identity-verification procedures.
The FTC alleges that many consumers were unable to access their money for long periods of time and suffered severe hardships such as evictions and car repossessions.
"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," Jessica Rich, director of the FTC's bureau of consumer protection, said in a press release.
The FTC is asking the court for injunctions to stop the alleged misconduct, as well as a financial judgment that would redress the harm done to consumers.
In its response, NetSpend said that it has "substantial defenses" available.
The company noted that it is required under federal law to confirm the identity of its customers, before adding: "NetSpend takes seriously and carefully adheres to these legal mandates to fight identity theft, money laundering and terrorist financing and believes that no one was deceived or harmed by the company's compliance with these legal obligations."
The FTC voted 2-1 to file the lawsuit, with Commissioner Maureen Ohlhausen voting no. The case was filed in U.S. District Court for the Northern District of Georgia.