After users of RushCard, the prepaid debit card started by rap mogul Russel Simmons, were locked out of their account money for weeks in October, scrounging for pennies under the couch, going without meat, and falling behind on bills like rent and car payments to get by until they could access the funds, the Consumer Financial Protection Bureau got involved.
But UniRush, RushCard’s parent company, hasn’t acquiesced to the CFPB’s investigation quietly. In early November it filed a petition to change or simply scrap the civil investigative demand (CID) that the CFPB sent as part of its investigation.
A CID, the bureau notes, is “a standard tool used in investigations by federal civil law enforcement agencies” when it needs to gather confidential information for an investigation. The bureau sent UniRush a list of information it sought with a deadline of 10 business days to comply.
But UniRush claimed that its deadline and request for information were “overly broad and unduly burdensome.”
The CFPB first got in touch with the company on October 23, 12 days into the outage, according to UniRush’s petition, via a phone call about the bureau’s concerns, mostly related to the sharp increase in consumer complaints it was receiving about prepaid cards and RushCard specifically. The bureau’s director, Richard Cordray, told the company it would still have to verify what went wrong and make sure the company compensated customers who had been harmed by the outage, thus issuing the CID on October 27.
UniRush claims that information gathering and the winter holidays would make it impossible to meet the bureau’s deadline of November 10, asking to push it back to January 15. “If such a modification [to have a longer deadline than 10 business days] cannot be granted, UniRush seeks in the alternative that the CID be set aside,” it states, although notes it would continue working to comply even after fling the petition.
The company also took issue with the information that was requested. While it acknowledged that requests for information from federal agencies “may not be unreasonable,” in its petition UniRush states, “Government investigations can grow to such a sweeping scope that they must be quashed or limited in scope or breadth.” It says that the CFPB requested consumer account information, including all of the fees each cardholder had to pay broken down by type, data that the company says it doesn’t collect. “UniRush has a duty to protect its consumers from government overreach and unnecessary intrusion into its consumers spending habits and private account information,” it says.
The complaint also argues that the CID “seems deliberately crafted to force UniRush to waive its legally protected rights” because it wouldn’t have time to review the documents requested to withhold some information.
The bureau denied the request, however, because UniRush didn’t give any specific dates or timetables as to when it would hand over information. In a letter sent to the company on Wednesday, Cordray wrote, “[T]hroughout this brief saga, UniRush has been unable to deliver on its pledges of cooperation with the Bureau and on its legal obligation to respond to the CID in a timely manner,” adding that the objections UniRush raised “plainly fail.” The company was told to provide a timetable within 10 days. A spokesperson for the bureau declined to comment further.
In response to the bureau’s decision, a RushCard spokesperson said via email, “We are committed to working cooperatively with the CFPB and have already begun to produce the documents they’ve requested.”
The spokesperson also said, “At this time all customer issues directly related to the technology transition have been resolved,” adding, “A very small pocket of our customers, however, are still being indirectly affected. For example, some of our customers are still resetting their direct deposit accounts that were disrupted due to the technology transition or attempting to reset their passwords to access their accounts, both of which are customers issues we encounter in the normal course of business.”
The petition also noted that it is “working diligently to address appropriately any consumer harm that was directly related to the conversion issues.” At the end of October it announced the creation of a multi-million dollar fund to reimburse customers’ financial losses incurred while accounts were disrupted, although some customers were put off that they may have to provide documents showing that they incurred late fees, lost apartment deposits, or had other setbacks.
The financial hardship was acute for many customers, particularly as a large portion of those who rely on prepaid debit cards make less than $25,000 a year.
The CFPB may also potentially be looking into RushCard’s fees because these kinds of cards tend to come loaded with them. One report found that refillable cards bought on the internet charge an average of $4.22 to open and maintain and $1.77 per transaction and other fees, adding up to a $10-$12 cost just to use them. Last year, the bureau proposed rules that would require card companies to give clear and upfront disclosures of the costs and risks, free access to account information, and protections for loss, theft, or errors.