Nearly 15 months after tens of thousands of users of the prepaid RushCard were cut off from their funds because of an apparent technical glitch, the company behind the card, UniRush and its payment processor MasterCard have been ordered to pay $13 million in refunds and penalties.
The Consumer Financial Protection Bureau Wednesday announced an enforcement action [PDF] against MasterCard and UniRush to resolve allegations the companies didn’t take adequate steps to stop the preventable glitch and then failed to provide customer service to account holders during the service breakdown.
UniRush manages the RushCard, a reloadable prepaid debit card, while credit card network’s MasterCard Transaction Service unit is the current processor for the cards.
According to the complaint, MasterCard and UniRush spent 13 months preparing to switch RushCard’s processing system to MasterCard’s processing platform, which ultimately took place Oct. 10 to Oct. 12, 2015.
However, something went wrong during the switch and issues with the cards began on Oct. 11, when customers reported that they were denied access to their funds or had accounts that incorrectly showed a $0 balance.
UniRush described the issues as a disturbance due to a “technical transition.”
“During this process, many of our customers were adversely affected when the technology that was used to transition their accounts did not work as planned,” RushCard CEO Rick Savard said in a statement at the time. “RushCard is working around the clock to resolve all of these matters.”
At the time of the switch, RushCard had about 650,000 active users, of which about 270,000 received direct deposits on their RushCard.
As a result of the preventable glitch, the CFPB alleges that UniRush did not accurately transfer all accounts to MasterCard, leaving tens of thousands of customers without use their RushCard to get their paychecks and other direct deposits, take out cash, make purchases, pay bills, or get accurate balance information.
Specifically, the complaint alleges that about 1,110 consumers’ accounts were incorrectly suspended for false fraud alerts, and the company delayed crediting cash deposits to other customer accounts or shut off access to certain funds.
UniRush also allegedly delayed the processing of direct deposits for more than 45,000 consumers, and did not process or improperly returned deposits of 2,000 others.
In some cases, UniRush erroneously double posted deposits and did not promptly process electronic debit transactions, giving the impression that RushCard holders’ account balances were much higher than they actually were.
This, the CFPB claims led some customers to accidentally spend more money than was actually loaded on their card. After the glitch was resolved, these customers unexpectedly lost money when UniRush used funds to offset negative balances and charged fees caused by the error.
During the outage, the complaint alleges that MasterCard sent inaccurate information account balances to UniRush when it declined to authorize certain transactions. As a result, some customers received incorrect information that their accounts were at a $0 balance, when there were actually funds on the cards.
Finally, the CFPB alleges that UniRush failed to provide cardholders with adequate customer service during and after the glitch.
“UniRush did not have an adequate plan to step up its customer service response to meet the increased demand caused by service disruptions,” the Bureau states.
Because of this failure, the complaint claims that some customer who called the company waited on hold for hours and could not obtain information about their accounts.
Despite hiring additional personnel to field customers complaints, the company allegedly failed to train customer service agents in time to meet the demand.
The CFPB complaint notes that the Bureau received about 830 consumer complaints from RushCard users in the weeks that followed the switch. In comparison, the Bureau only received 147 complaints about prepaid cards from Nov. 2014 to Jan. 2015.
In order to resolve the CFPB’s allegations, UniRush and MasterCard have been ordered to pay an estimated $10 million in restitution to tens of thousands of affected customers.
Under the redress plan, the companies will provide redress to customers based on the severity of their issue:
• $25 to each affected customers who experienced a denied transaction;
• $150 to each customer whose card was placed in a possible fraud status, preventing access to customers;
• $100 to each customer who received an inaccurate account balance of $0;
• $100 to each customer whose deposits were not processed in the week after the payment processor conversion;
• $250 to each customer who desist was returned to funding source, improperly loaded onto an expire for inactive card, or was unable to unsuccessfully processed by UniRush;
• $150 to each customer who could not transact or access account funds because the account was to transferred to MasterCard;
• $150 to each customer who could not transact or access funds because a lost or stolen card was not promptly replaced during the conversion;
• $150 to each customer who initiated a cash load that was not promptly posted to their account following the glitch;
• $50 to each customer whose card-to-card transfers were not processed immediately following the processing switch.
Additionally, the companies must pay a $3 million civil penalty to the CFPB’s Civil Penalty Fund and devise a plan to prevent future service interruptions.
Wednesday’s enforcement action comes after UniRush agreed in May 2016 to pay $19 million to resolve a class action lawsuit filed by affected cardholders.
Compensation under that settlement was expected to reach as much at $500 for customers who can provide documentation of losses they incurred because of the outage.
RushCard previously reimbursed customers for the fees typically levied on the cards. Nearly two weeks after the issues began, the company said it would waive all fees for new and current users between Nov. 1 and Feb. 29, 2016 as an incentive to stay with the company. At that time, the company said access to funds had been restored for most customers.
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