The US Federal Trade Commission (FTC) has sued prepaid card company NetSpend, a wholly-owned subsidiary of TSYS, for using deceptive marketing practices to dupe the consumers.
On its website and in marketing materials, NetSpend claims that consumers who buy the NetSpend card can “use it today,” that they will have “immediate access,” and that their money is “always available”.
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The company also claimed that consumers are ‘guaranteed approval’ for a card, according to the FTC’s complaint filed in federal court in Atlanta.
In fact, many consumers did not receive access to their funds as promised in numerous instances, many of whom do not have bank accounts, about access to funds deposited on defendants’ debit cards.
The US consumer protection agency alleged that NetSpend tells consumers that its debit cards offer an alternative way to store and immediately access their funds.
However, upon loading funds onto the cards, many users were not able to access their money, either because NetSpend denies or delays activation of the card, or because it blocks consumers from using it.
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By GlobalDataThe complaint further alleges that consumers who closed their accounts and requested refunds had to wait numerous weeks for their money. In some instances, consumers’ funds were allegedly depleted by company fees.
According to the FTC, NetSpend misrepresents that when customers dispute charges on their cards, it will grant provisional credits so they can access their funds while the error is resolved. In many cases, however, NetSpend failed to provide provisional credits.
The FTC said that the NetSpend should return consumers’ funds and ensure to offer them with assured access to their funds in the future.
FTC director of the bureau of consumer protection Jessica Rich said: “Innovative financial products can offer many benefits to consumers. However, when companies promise consumers ‘immediate access’ to their funds, they need to honour those promises.
“We’re committed to protecting consumers – particularly those who are financially strapped – from deceptive practices involving their payment choices.”
