FTC Sues NetSpend Over Access to Funds

Many people who don’t have bank accounts rely on prepaid debit cards which you buy and add money to so you can make purchases and pay bills. But the FTC says thousands of NetSpend prepaid debit card holders had trouble getting access to cash they loaded onto the cards, or to direct deposits from their paychecks or government benefits. Cardholders who couldn’t access their money often had no other way to pay for necessities, which caused some severe financial hardship, including late bill payments, repossessed cars, and even eviction.

NetSpend markets their cards – in English and Spanish – to people who don’t have traditional checking or savings accounts. The FTC’s lawsuit claims NetSpend’s ads told consumers they would have immediate access to funds loaded on the cards and were guaranteed approval for the cards. Also, NetSpend promised that cardholders disputing transactions would get temporary credits of those transaction amounts, pending investigation.

Despite NetSpend’s promises, the FTC says many consumers also were not able to access their money immediately, and in some cases lost access for days or weeks or even completely. And the FTC says that in reality, many NetSpend cardholders were not automatically approved to use the cards but, instead, all consumers had to go through a sign-up process which sometimes resulted in approval being denied and any funds placed on the cards being lost.  The FTC also says that in many cases, NetSpend didn’t issue temporary credits during transaction disputes in a timely way, if at all.

If you’re considering using a prepaid card, be sure you understand how it works.  Read the terms before putting money on the card, and do an online search to check out the company’s track record. If a prepaid card company deceives you about its terms and services, report it to the FTC.