Over 430,000 consumers, who purchased and deposited money on NetSpend Corporation (“NetSpend”) prepaid debit cards will receive refund checks from the Federal Trade Commission (“FTC”), totalling more than $10,000,000 as part of NetSpend’s settlement with the FTC.
In November 2016, the FTC charged NetSpend with violations of the FTC Act alleging NetSpend deceptively advertised that: (i) NetSpend cards are ready to use immediately and consumers will have immediate access to their funds; (ii) consumers are guaranteed to be approved; and (iii) NetSpend will provide provisional credits for account errors. In its complaint, the FTC alleged that consumers did not receive access to their funds as promised; many consumers suffered severe financial hardship such as evictions, car repossessions, and late fees on bills while waiting for weeks, or longer, to access their funds. The FTC alleged that frustrated consumers who closed accounts and requested refunds had to wait several weeks, or longer, for their money, and, in some cases, the consumer’s funds were almost completely depleted by company fees. Additionally, the FTC alleged that NetSpend simply lied to consumers when it claimed that all consumers would be “guaranteed approved” and that consumers would get provisional credits to access their funds while any account disputes were resolved.
As part of the settlement, NetSpend agreed to notify and provide refunds to eligible consumers who requested refunds, as well as remit to the FTC any fees collected from NetSpend cards that were eligible for a refund, but were not paid out previously.
Takeaway: As we previously blogged, part of the FTC’s 2018 agenda is to bring cases which show actual harm to consumers and provide refunds when possible to injured consumers. This settlement and refund is evidence of the FTC’s continued enforcement of deceptive practices that in fact harm vulnerable consumers.