Mastercard and UniRush Ordered to Pay $13 Million by the CFPB

Thousands of consumers who were affected by the RushCard prepaid debit card outage will soon receive refunds thanks to a new order by the CFPB.

The Consumer Financial Protection Bureau (CFPB) has ordered UniRush – the company behind Russell Simmons’ prepaid debit card – to pay $10 million in restitutions to consumers who were locked out of their funds in October 2015. The CFPB claims that the technological breakdowns that prevented tends of thousands of consumers from accessing their RushCard deposits were preventable on the company’s part. During their investigation, the agency found that UniRush and their payment processor, Mastercard International Incorporated, denied consumers access to their own money, botched the processing of deposits, and failed to provide customer service when they were impacted by the outage. On top of the $10 million refund, the two companies must also pay a $3 million fine to the CFPB.

Depending on which part of the malfunction RushCard consumers experienced, they are entitled to different compensation from the companies involved. The table below breaks down the issues involved and the relief consumers can expect to be deposited to their accounts within 60 days of the order being issued.

Who Can Qualify for Compensation?

Refund Amount
Consumers who experienced a denied transaction during the extended blackout period on October 12, 2015$25
Consumers whose card was placed in a possible fraud status that prevented them from transacting or accessing account funds$150
Consumers who received balance information in October 2015 incorrectly indicating that there were no funds in their account$100
Consumers whose ACH deposits were not processed in the week after the payment processor conversion according to UniRush's representation that RushCard users would receive direct deposit of their paychecks or government benefits "up to two days sooner" than their official pay date$100
Consumers 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$250
Consumers 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
Consumers who could no transact or access account funds because the account was not transferred onto the 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
Consumers who could not transact or access account funds because a lost or stolen card was not promptly replaced$150
Consumers who initiated a cash load that was not promptly posted to the account following the October 12, 2015 payment processing conversion$150
Consumers whose card-to-card transfer(s) were not processed immediately following the October 12, 2015 payment processing conversion$50

The CFPB has begun taking a closer look at not just RushCard, but the entire prepaid card space. Up until now, there has been relatively little oversight within the industry, potentially leading to some abuses. Towards the end of last year, the Bureau issued new rules that tightened some of these regulations surrounding prepaid accounts. Chief among these was a standardization of the disclosures for prepaid accounts – similar to the one credit card accounts must abide by. The idea behind these new rules is to prevent consumers from opening accounts and being hit with hidden fees at a later point in time. The new CFPB prepaid debit card rules also limit the exposure of consumers whose cards are lost or whose funds are stolen.

Prepaid debit cards are one of the fastest growing consumer financial products in the United States. They are especially popular among underbanked individuals who do not have the proper finances or credit score required to open a checking or credit card account. Many individuals come to rely on these cards as their primary way of depositing funds, or receiving payments from employers. This is, in part, what made the RushCard situation all the more problematic. Many of the customers who had their funds frozen likely did not have any other money available to them. This may have, in turn, prevented them from making rent payments or even buying bare essentials for the duration of time their accounts remained frozen. “Mastercard and UniRush’s failures cut off tens of thousands of vulnerable consumers from their own money, and threw some into a personal financial crisis,” said Richard Cordray, current CFPB director.

According to the CFPB, the bureau received 830 complaints from RushCard users in the weeks after the company switched payment processors. That is nearly 7 times more than the total prepaid debit card complaints the Bureau received the prior year.

Just two days after the order was passed, President Donald Trump signed two new executive orders, one of which calls for a review of the Dodd-Frank Act – the law responsible for the creation of the CFPB. Gary Cohn, director of the National Economic Council, suggested one way to scale back the CFPB would involve replacing its current director, Richard Cordray. At this time, however, no specific plans were announced by the administration, and reports suggest any changes would require a lengthy legal process.

Joe Resendiz

Joe Resendiz is a former investment banking analyst for Goldman Sachs, where he covered public sector and infrastructure financing. During his time on Wall Street, Joe worked closely with the debt capital markets team, which allowed him to gain unique insights into the credit market. Joe is currently a research analyst who covers credit cards and the payments industry. He earned a bachelor’s degree from the University of Texas at Austin, where he majored in finance.

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