Breaking News: CFPB’s Cordray Weighs in on RushCard (Oct. 23, 2015)

Written by FinTech Futures
23rd October 2015

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Despite reassurances from UniRush Chairman and CEO Rick Savard earlier this week that the company is working around the clock to address any remaining cardholder issues arising from its recent technology migration, CFPB Director Richard Cordray today offered his two cents on the matter, saying the bureau will use “all appropriate tools at our disposal to help ensure that consumers obtain the relief that they deserve.”

UniRush last week revealed a major service interruption with its popular RushCard that resulted in many of its customers experiencing difficulty using their cards and accessing funds. The problem began when UniRush changed processors, according to the company.

Cordray said he has spoken to Savard to ensure that the company is taking action to address the issue and that no other consumers will be denied access to their money. The most constructive path forward, according to Cordray, is for UniRush to reduce consumer harm and to take immediate action to resolve these issues, a measure the company has made clear—in interviews and through social media channels—that it’s already doing. And, following a mea culpa by RushCard co-founder Russell Simmons, the company announced a four-month holiday from card fees that will run Nov. 1, 2015, through Feb. 29, 2016.

“The vast majority of customers have had their problems resolved,” said Savard in a statement. “We have a handful of people left who are still not able to access correct information about their accounts,” he said. “Their funds are there, but their information is still inaccurate. We are working to contact them individually to assist them with their needs.” Savard added that RushCard will be making a significant announcement on how the company plans to make things right with customers who were severely inconvenienced and in some cases suffered hardships.

The CFPB also announced it has contacted regulators, such as the Office of the Comptroller of the Currency and the FTC, “to ensure a comprehensive response that addresses the situation quickly and holds accountable all of the parties involved to make consumers whole.” Even before issuing its official statement, the CFPB on Twitter was urging affected customers to file complaints on the CFPB’s Website. The CFPB’s monthly snapshots of compliant data have shown that prepaid accounts for less than 1 percent of all complaints it has received.

John Thompson, senior vice president of advisory services for the Center for Financial Services Innovation, says the industry can learn from the RushCard incident, but it’s still unclear what actually caused the problems—something he believes regulators and industry participants should be looking at. “I think it would be wrong to spend our time debating the merits of prepaid,” he says, noting that CFSI’s Prepaid Scorecard shows the industry has made strides in terms of lowering fees and providing value to consumers. “We would hate to see this translate into some broad-based portrayal of prepaid not having value or not being stable, because that’s not true,” Thompson says. “Prepaid card delivery, like other kinds of financial services, is complicated and in many cases multiple parties have to work together.” This issue will shine a spotlight on those roles in the value chain, where Thompson acknowledges there already are controls in place, such as issuer requirements for third-party oversight.

What’s also unclear is whether this issue will affect the CFPB’s final rulemaking on prepaid accounts, which is expected in early 2016. Lauren Saunders, associate director, National Consumer Law Center, told Law360 she expects those rules most likely will deal with issues like proper disclosures and cybersecurity, not technical issues.

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