For nearly two weeks, customers of RushCard, the prepaid debit card company co-founded by rap mogul Russell Simmons, were cut off from all of their funds after a technology problem was triggered by the company changing over to a new processing provider. On Thursday it announced that “systems are now fully restored,” but that it had created a fund to help customers who had lost access. The company says transactions now process as usual, although it is “working with a handful of customers that appear to have issues that are unrelated to the conversion.”
Not all customers agree that things are back to normal, however. Katreece Wright told ThinkProgress that she and her husband have gone since October 15 without access to his paycheck stored on his RushCard. During the initial outage, her husband purportedly inserted his card into an ATM machine, only to have the ATM machine eat it. After repeated calls and messages to Simmons himself, Wright says, the company sent them a new card this week, only for them to find out that it had somehow already been activated. While they can see his money on their account, it’s still tied to the old card number, so they can’t make any use of it.
Wright says the income stored on his card was meant to cover their family’s expenses while she is on leave after spending two weeks in the hospital to treat her brain tumor and pulmonary hypertension. “With my husband now having to take the sole responsibility of our bills, it was very critical that we have access to our money,” she said. “This has brought a ton of stress when I should be resting.”
Two weeks after losing access to their account, Wright says the family is down to just $15. “We don’t have gas money, I’m out of meat to feed my children,” she said. Their water is due to be shut off on Sunday or Monday after they missed a payment that was due on Wednesday. Saturday is the last day Wright has to make a payment on her car before it’s counted as late and impacts her credit score.
“At the end of the day, Russell Simmons’s kids are going to eat and my kids should be able to eat too,” she said. “It’s not his money. It’s our money.”
A user named Cassie told ThinkProgress on Twitter that she’s also gone more than a week without her money and still can’t get to it as of Friday morning. While her money shows up as deposited, it’s not available to be withdrawn, she reports. “I have a 6 month old baby and I haven’t received my direct deposit,” she said. The disruption means she hasn’t been able to pay rent.
The company’s customer service lines also appear to still be experiencing huge wait times and other issues. Wright said that when she calls customer service, she gets continually transferred or put in a wait queue only to be eventually hung up on. “I must have spent 1,000 phone minutes on RushCard alone,” she noted.
Cassie said when she calls, it rings twice and then disconnects. Others took to Twitter to say they had called to either find the system down or be put on hold for hours at a time. Many say their accounts are still on hold.
RushCard did not respond to a request for comment on the customers who still say they are experiencing problems.
Prepaid debit cards come with other risks beyond the technology outages plaguing by RushCard users. They are often riddled with fees; refillable cards purchased on the internet charge $4.22 on average to open and maintain plus $1.77 on average per transaction and other fees, costing a user between $10 and $12 just to use. RushCard’s plans similarly include activation, maintenance, and transaction fees and one has a fee for not using it. They also don’t fall under many of the regulations traditional banks adhere to. While RushCards are FDIC-insured, others are not, and some don’t have error protection or liability for loss or theft.
The customer base for these cards are also often those who can least afford to lose or go without access to money. Nearly 40 percent of those who use prepaid debit cards, the biggest group, makes less than $25,000 a year.
RushCard also said Thursday it would create a multi-million dollar fund to reimburse customers for financial losses they incurred while they were unable to access their accounts for more than a week. While it says specific details on the fund — such as a timetable for when money will go out or what documentation it will require to make a claim — will be announced after it is reviewed by financial regulators and its own advisers, it plans to “work with those who have sustained losses to make sure our customers are properly reimbursed.” It told the AP that customers who can show incurred late fees, lost apartment deposits, or another financial setback will receive funds.
In the meantime, a spike in complaints to the Consumer Financial Protection Bureau’s consumer hotlines has gotten the regulator’s attention. It’s looking into the situation, although is still determining what action might be taken. The Associated Press also reports that at least one class-action lawsuit has been filed, although it may run into significant hurdles as the company’s contracts include an arbitration clause blocking class action suits and jury trials.
Wright herself ran into that issue after talking to a lawyer about potentially suing. She says she’s going to pursue the arbitration process but is further turned off. “I’m starting to feel, after thoroughly reviewing their cardholder agreement, they have themselves thoroughly protected if this happens,” she said. “It’s scary because it reads like they can get away with it.” She’s also skeptical of the compensation fund, particularly that she might be required to prove her hardship. “I don’t think I should have to take pictures of my refrigerator to show them how I’m trying to maneuver to feed my kids,” she said. “The fact that we couldn’t access our funds to do our normal life is hellish enough.”