Page 12 - GS170202

News

CFPB regulates

prepaid, Congress

eyes CFPB

he Consumer Financial Protection Bureau is
flexing its regulatory might, leveling multi-
million dollar fines on Mastercard and pre-
T paid debit card company UniRush LLC for
technology snafus that left cardholders without access
to their funds for days in late 2015. News of the action
came out on Feb. 1, 2017, as some lawmakers prepared
to take a legislative scalpel to the CFPB's controversial
prepaid card rules.

The UniRush prepaid debit card, known as RushCard
and launched in 2003 by hip-hop entrepreneur Russell
Simmons, made headlines in October 2015 when tens
of thousands of cardholders were turned away from
POSs because their cards were declined despite having
available funds on deposit with their cards. At the
time, MasterCard Payment Transaction Services, a unit
of Mastercard, was taking on RushCard's processing
workload.

The changeover was supposed to result in a two-hour
blackout. "But immediately after UniRush switched to
Mastercard, tens of thousands of consumers were jarred
by a series of crippling service failures," CFPB Director
Richard Cordray said in a statement. For example, more
than 1,000 cardholders had their accounts suspended
for suspected fraud, Cordray said. Also, direct deposits
to about 45,000 accounts were delayed, and thousands
of other deposits were either "improperly returned" or
double posted.

"Adding insult to injury, UniRush's customer service
system utterly failed to meet the needs of its customers,"
Cordray said. "By botching the changeover to a new
payment processing platform, UniRush and Mastercard
betrayed the trust of tens of thousands of consumers
who rely on the RushCard to conduct and manage their
day-to-day finances."

The upshot: UniRush and Mastercard were ordered to
pay an estimated $10 million in restitution to affected
cardholders and a $3 million civil penalty to the CFPB.
The two companies also were ordered to take steps "to
prevent any of these things from happening again in
the future," Cordray said.

The action against UniRush and Mastercard is the latest
chapter in the CFPB's campaign to establish greater
regulatory accountability in the prepaid debit card
market.

12