Prepaid debit card provider RushCard has announced a fund to reimburse cardholders affected by a massive technical glitch that left some without access to their money for weeks.
With people unable to get their money, many of RushCard's customers experienced serious financial distress, including interrupted utilities, missed car payments and threats of eviction.
Now that the company says it has restored all of its cards features, including the payday-loan-like 2-day advance product, it's now looking to help customers with losses related to the glitch.
No timetable yet
While it has yet to divulge details of the plan, RushCard says it will begin distributing compensation under the program to affected cardholders as soon as the plan is reviewed by "financial regulators as well as respected community leaders and banking industry advisers," according to a press release.
"RushCard and I continue to be completely committed to making sure each and every one of our customers is made whole," RushCard co-founder Russell Simmons said in a statement. "While the reimbursement and review process will not occur overnight, we will act as quickly as regulators will allow and are already doing so on a case-by-case basis."
A reckoning for prepaid debit card companies?
Overall, this is good news, says Lauren Saunders, associate director of the National Consumer Law Center.
"RushCard did the right thing by setting up a fund to compensate consumers who were harmed when they could not get access to their money. We hope that the fund is large enough and that the process of accessing it is quick and easy," Saunders says. "RushCard deserves credit because companies are not always as quick to provide remedies for consumers who are harmed."
While reimbursing customers will help those affected by RushCard's issues, it probably won't stem calls for greater regulation of prepaid debit cards. Earlier this week, the NCLC and other consumer advocacy groups sent a letter to regulators calling for greater supervision of the cards, which look and act like normal debit cards tied to a bank account but lack many of the same safeguards.
"All of the parties involved in the RushCard case along with the Consumer Financial Protection Bureau and bank regulators need to take a close look at what went wrong in this case to make sure that it never happens again and that consumers are fully protected," Saunders says.
With the CFPB already investigating the incident, they may soon get their wish.
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