Nearly two weeks after Russell Simmons’ RushCard fiasco came to light, the U.S. Consumer Financial Protection Bureau says it is investigating the freezing of financial accounts that left customers without access to their funds via the prepaid cards marketed by the hip-hop magnate.
Ohio-based RushCard is struggling to completely re-link thousands of cardholders with access to their accounts and their money. A technical malfunction during a processing system conversion on Columbus Day weekend left hundreds of thousands of customers unable to use their cards.
Some customers found that their direct payroll deposits or government benefits linked to their cards had been returned.
The Consumer Financial Protection Bureau said on its Facebook page that it is concerned about RushCard consumers not having access to their money. Here’s is the agency’s full statement:
It is outrageous that consumers have not had access to their money for more than a week. We are looking into this very troubling issue. Consumers increasingly are relying on prepaid products to keep their funds, make purchases, and manage their money. Customers who are still affected by this situation should consider stopping their direct deposit, so that they can get their next paycheck by check or have it deposited in another account. Consumers can also ask anyone who has charged them a late fee on a payment affected by this delay to waive that fee. More generally, all consumers using prepaid cards should watch the transactions on their accounts, and report any problem promptly to the prepaid card issuer. The Bureau accepts consumer complaints at http://www.consumerfinance.gov/complaint/ or by phone toll-free at 855-411-2372.
Prepaid cards like RushCard are increasingly popular with low-income American consumers, especially among many “underbanked” consumers who for whatever reason do not or cannot use their local banking institutions.
These cards can be loaded with cash at shops that act as agents, or via an electronic transfer, often from an employer. Like a debit card, they can be used to make payments or withdrawals at a cash machine.
But these cards are not legally bank accounts. Some don’t qualify for protection from the Federal Deposit Insurance Corporation (FDIC), which makes bank depositors whole if their banks keel over. However, RushCard users are reportedly insured by an alliance with an underlying bank. But there are no branches RushCard users can visit for quick redress.
In 2013, the FDIC reported that two-thirds of the households that had used prepaid cards in the previous 30 days were unbanked or underbanked, meaning they made limited use of conventional financial accounts.
Here is RushCard’s full statement posted on its Facebook page two days ago:
We have been updating our systems to resolve the issues that have been affecting some of you. Those updates began yesterday afternoon and continued overnight. Most of you should now find your card working normally and expected deposits in your account.
1. Some customer’s cards were made wrongly inactive during the conversion. This has been corrected and those affected accounts are now fully accessible. Please begin using your card at this time.
2. Last week, some customer’s direct deposits were returned to your payroll or government benefits administrator as a result of inaccurate account information. We have put in new processes to review all incoming deposits beginning this week to ensure deposits are posted in a timely manner. If you were impacted by this issue, please contact your employer/government benefits administrator to verify the funds were returned and either obtain the funds from them or request that they re-submit the payment to your RushCard using your correct account information which can be found on the cardholder web site at account.rushcard.com.
We are not done. We are committed to making sure that every last customer is satisfied and every last issue is resolved.