Skip to main content
Menu Icon
Close

InfoBytes Blog

Financial Services Law Insights and Observations

Prepaid Card Company Settles FTC Charges, Agrees to Provide $53 Million in Consumer Relief

Consumer Finance FTC Prepaid Cards

Consumer Finance

On March 31, the FTC announced that it had reached a $53 million settlement with a prepaid card company over charges that the company deceived consumers about access to funds deposited on its debit cards in violation of the FTC Act. The 2016 complaint alleged that the company participated in deceptive advertising claims by informing consumers that they would be able to immediately access funds stored on reloadable prepaid debit cards. Many consumers claimed, however, that they were unable to access their money for weeks or at all because the company either “denie[d] or delay[ed] activation of the card, or because it block[ed] consumers from using it,” and that as a result, many of them suffered severe financial hardships. Moreover, the complaint also claimed that some consumers who closed accounts and requested refunds had to wait several weeks for their money or were informed their funds were allegedly depleted by “account inactivity fees.”  The settlement requires the company to provide the $53 million settlement amount to consumers in refunds.

The Commission vote approving the settlement was 2-1. Commissioner Terrell McSweeny issued a statement in support of the settlement, noting that he “believe[s] that the proposed stipulated order provides both injunctive and monetary relief that effectively addresses the challenged conduct. The order prohibits [the company] from misrepresenting to consumers how long it will take, or what conditions are necessary, to activate prepaid cards and have access to funds.” Acting Chairman Maureen Olhausen dissented, explaining, “[f]irst, the majority fails to consider the context of [the company’s] representations in concluding that [the company] made false claims to consumers. Second, the settlement order imposes monetary relief unrelated to [Defendant’s] allegedly deceptive advertising.” Olhausen further explained that, in her view, “[c]ontext often has a significant effect on what reasonable consumers take away from representations in advertising. As FTC law has long recognized, ‘the tendency of advertising to deceive must be judged by viewing it as a whole, without emphasizing isolated words or phrases apart from their context.’”