Total System Services' prepaid unit, Netspend, will pay consumers who bought its cards up to $53 million to resolve a Federal Trade Commission suit alleging that the company misled consumers about accessing funds.
Austin, Texas-based Netspend has agreed to refund affected consumers $13 million in fees, and to assist consumers who loaded approximately $40 million in funds to prepaid cards but failed to complete the required steps to verify their identity and activate their cards, Netspend said in a March 31 press release.
The FTC charged in a complaint filed in November 2016 that Netspend’s marketing materials for more than five years indicated that prepaid card customers—many of whom are unbanked—could purchase a card, load funds on, and “use it today,” but many consumers did not receive their funds as promised because they had difficulty satisfying federal laws requiring identity verification and activation of the account.
Netspend did not admit wrongdoing in the suit, but the company agreed to settle claims applying to certain consumers who purchased Netspend prepaid cards between Jan. 1, 2010 and Aug. 31, 2016. Since Sept. 1, 2016, affected consumers have accessed almost 20% of the $40 million, Netspend said in the release.
In addition to refunding fees charged prior to the end of the covered period, Netspend said it will refund any additional fees charged to affected inactivated accounts after Aug. 31, 2016. The $40 million represents less than one-half of one percent of the $117 billion in funds spent on Netspend cards from 2010 through the third quarter of 2016, Netspend said in the release.
“We do a great deal to encourage card activation and comply with federal law, and we welcome this opportunity to assist those who have not activated their accounts,” Netspend said in the release, noting that it settled the matter to avoid the cost of protracted litigation. “Netspend also remains committed to meeting our federal obligations to combat identity theft, fraud, money laundering and terrorist financing,” the company added.