The Prepaid Card Industry Faces A Multi-Front Battle that Begins in Florida

From her press release:

Attorney General Pam Bondi’s office is investigating five prepaid debit card companies for possible deceptive and unfair practices. The Attorney General’s Economic Crimes Division issued a series of subpoenas regarding possible hidden fees on prepaid debit cards. Some subpoenas also ask for information about possible misrepresentations promising to improve consumers’ credit scores.

“Failing to disclose fees is essentially stealing money from consumers,” said Attorney General Bondi. “We will aggressively investigate these practices and ensure that Floridians are protected from hidden fees and charges.”

Subpoenas were issued to First Data Corporation; Green Dot Corporation; Account Now, Inc.; Netspend Corporation; and Unirush Financial Services, LLC.

There is a multi-front battle brewing here for prepaid. First, the companies will need to defend themselves in Florida. Second, it is a good bet that other states’ attorneys general will follow Florida if there seems to be any substance behind the claim. Third, regardless of what the subpoenas uncover, there is the court of public opinion. One local television station has set up a hotline for complaints about prepaid cards. See their story and hotline here: http://www.abc-7.com/Global/story.asp?S=14680571.

While he has yet to see the opinion, RushCard founder Russell Simmons has already begun arguing his case in the court of public opinion with his own press release.

Simmons has issued the following statement:

“I completely welcome any and all debate, discussion and understanding about the best companies in the prepaid debit card industry, which my RushCard company helped found. The RushCard is extremely transparent in terms of the presentation of its fees and its services. All of the information is available for everyone to see on rushcard.com.

The Consumer Financial Protection Bureau has already met with attorneys general from several states to talk about how they might work together on consumer protection. So, there is a possibility that this will also lead to some federal action on the subject of fees.

With Attorney General Bondi’s action, the prepaid industry has come under pressure again. This is the next phase in a debate not only on a particular product, but also on how consumers who have been shut out or voluntarily left the financial mainstream access financial services.

Read the full press release here: http://www.myfloridalegal.com/newsrel.nsf/newsreleases/7AD2F1581F3BB2A485257895004D18D5.

See the full Simmons statement at: http://www.prnewswire.com/news-releases/russell-simmons-responds-to-florida-attorney-generals-subpoena-of-rushcard-122263928.html