Nearly a year and a half after a system failure left tens of thousands of RushCard customers without access to funds on their prepaid debit cards, the Consumer Financial Protection Bureau has ordered parent company UniRush to pay $10 million in restitution to customers and a $3 million fine. The company will split the fines with MasterCard, which was in charge of processing RushCard customer transactions at the time.
Green Dot, one of the largest issuers of prepaid debit cards in the U.S. announced earlier this week that they will acquire UniRush in a $147 million deal. In a statement detailing the terms of the acquisition, Green Dot said it would eat any potential regulatory fines that RushCard might face in the wake of the 2015 system failure.
In its order, the CFPB said the botched MasterCard transition, although it was 13 months in the making, led to “a rash of preventable failures.” UniRush and MasterCard failed to “properly prepare for the change in processors and failed to adequately test the new system.”
“Throughout this frustrating saga, UniRush’s customer service efforts failed to address problems adequately,” Richard Cordray, director of the CFPB, said in a statement Wednesday. “All of this stemmed from a series of failures that should have been anticipated and prevented.”
The CFPB’s investigation has helped color in the details, and the extent of the damage is staggering.
At the time of the system failure, RushCard representatives did not give a clear answer on how many of their prepaid cardholders were impacted by the glitch. A Yahoo Finance investigation found the source of the glitch occurred when UniRush attempted to transition from one payment processor to a new payment processor, MasterCard. According to the CFPB, the problems officially began on October 10, 2015, and lasted until October 12, 2015, but created a ripple effect of errors and miscommunication that lasted weeks in some customers’ cases.
The glitch led to delayed direct deposits for more than 45,000 of the company’s 675,000 customers, leaving them without access to their paychecks or even government benefits. Thousands more customers accidentally overdrafted their accounts because UniRush “erroneously double posted deposits” into some accounts, leaving the balances artificially inflated, the CFPB says.
During MasterCard’s transition, 1,110 consumers’ accounts were incorrectly suspended, the agency found. Some users could not access funds they set aside in Rush Goals funds, which are meant to be used like a savings account.
One of the most surprising claims in the CFPB’s order is that UniRush used funds consumers loaded onto their RushCards to offset negative balances caused by its processing errors. In the midst of the confusion, some consumers were told their cards had been flagged for fraud and their funds frozen as a result.
One of UniRush’s biggest failures throughout the snafu was inadequate customer service support for impacted customers. Customers reported waiting hours on the phone only to be hung up on by customer service representatives.
“UniRush had no contingency plan that could handle the surge in customer complaints,” Cordray said. “Additional customer service agents who were hired were not sufficiently trained, which meant they often were unable to resolve people’s questions and complaints.
Russell Simmons, UniRush-co-founder and the celebrity face of the brand, said in a statement the ordeal had been “one of the most challenging periods in my professional career.” In the wake of the outage, Simmons responded to disgruntled customers personally on Twitter and Facebook to apologize and offer assistance.
“I cannot thank our customers enough for believing in us, remaining loyal and allowing us to continue to serve their needs,” Simmons said in a statement.
A UniRush spokesperson offered this statement in response to an e-mail from MagnifyMoney:
“RushCard welcomes our settlement with the CFPB. We maintain that our company did not engage in any wrongdoing, and do not admit to such in our Consent Order with the CFPB.
Since the event in 2015, we believe we have fully compensated all of our customers for any inconvenience they may have suffered through thousands of courtesy credits, a four-month fee-free holiday and millions of dollars in compensation.
The vast majority of our customers are incredibly loyal and have either remained with us or returned to RushCard. In fact, the last quarter of 2016 marked the largest number of new customer sign-ups in our company’s history.
With this settlement behind us, we are eager to focus all of our energy now on serving our customers and providing them with the best services available in the prepaid industry.”
In the fall of 2016, the CFPB finalized long-awaited regulations that will add federal protections for millions of Americans who use prepaid debit accounts. Those regulations will go into effect October 2017. The new rules will offer similar consumer protections as debit cards.
How RushCard Will Pay Fines to Customers
According to the CFPB, the amount each RushCard customer can expect to receive depends on what kinds of inconveniences they faced once the glitch occurred. They have attached a fine amount to each type of incident consumers faced as a result of the botched transition.
RushCard parent company UniRush will send funds to affected consumers, the agency said.
- $25 to each consumer who experienced a denied transaction during the extended blackout period on October 12, 2015.
- $150 to each consumer whose card was placed in a possible fraud status that prevented them from making purchases or withdrawing funds.
- $100 to each consumer who received balance information in October 2015 incorrectly indicating that there were no funds in their account.
- $100 to each affected consumer whose ACH deposits were not processed in the week after the payment processor conversion.
- $250 to each consumer whose ACH deposit was returned to the funding source, improperly loaded onto an expired or inactive card, or was unable to be successfully processed by UniRush in October 2015.
- $150 to each affected consumer that UniRush offset due to a negative account balance incurred because of rescission of a duplicate ACH deposit or delayed processing of an ACH debit transaction.
- $150 to each consumer who could not transact or access account funds because the account was not transferred onto the [MasterCard/MPTS] payment-processing platform or improperly transferred to the MPTS payment-processing platform in a status that would not allow the card to function.
- $150 to each consumer who could not transact or access account funds because a lost or stolen card was not promptly replaced or the replacement card did not function after the payment processor conversion.
- $150 to each consumer who initiated a cash load that was not promptly posted to the account following the October 12, 2015, payment-processing conversion.
- $50 to each consumer whose card-to-card transfer(s) were not processed immediately following the October 12, 2015, payment-processing conversion.