Tanya Reasonover lost her phone service. And her cable service. She couldn’t buy groceries and had to cancel her daughter’s birthday party.
The 48-year-old Detroiter wasn’t broke — in fact, she’d just been paid. But like thousands of users of the RushCard prepaid debit card, Reasonover simply couldn’t get to her cash for eight days.
“I spent three hours on hold,” Reasonover said during the outage two weeks ago. “Then, as soon as somebody answered the phone, they hung up. You just cannot get your money.”
The service problems started Oct. 12 when RushCard changed payment process, and customers began getting access to some of their money late last week, although some problems were continuing. As of Monday, Reasonover said her account was short by $150, she was charged her regular monthly RushCard service fee and she is out at least $30 in penalties after being unable to pay her utility bills.
“They’re not going to compensate people or pay late fees,” Reasonover said Monday. “My phone got cut off the entire time. I told them I I need to care for my daughter, who has a brain injury, and they really didn’t care. They told me so many times, ‘Go to the ATM,’ and it’s still a big mess. And they still owe me $150.”
RushCard was founded by music mogul Russell Simmons, and aims to serve consumers without bank accounts. The prepaid debit card can receive direct deposits from employers, as well as Social Security and Veteran’s benefits. It can be used like a debit or ATM card, and offers a bill-paying service. Simmons has said RushCard has hundreds of thousands of account-holders.
In 2013, the Federal Deposit Insurance Corporation estimated that nearly 8 percent of all U.S. households — nearly 17 million adults — are “unbanked,” relying on check-cashing stores, money orders and prepaid debit cards. The majority of unbanked consumers say they can’t meet minimum deposit requirements or want to avoid high or unpredictable bank fees. By some estimates, there are 16 million prepaid cards in circulation, and the FDIC notes that more than 17 percent of all unbanked households have relied on the cards.
On Monday, Simmons was still posting updates about RushCard service on his Facebook page, and said that all “major functionality” has been restored. But questions are lingering and RushCard has attracted at least one potential class-action lawsuit as well as the scrutiny of federal regulators.
On Friday, Richard Cordray, director of the federal Consumer Finance Protection Bureau released a statement, noting he had personally spoken that day with Rich Savard, CEO of UniRush LLC, which issues the cards.
“Further, we indicated that the CFPB is prepared to use all appropriate tools at our disposal to help ensure that consumers obtain the relief that they deserve,” according to Cordray’s statement. After that discussion, Savard released his own statement saying that UniRush will make an announcement about how it will help its customers affected by the problems. No statement has been posted.
Regulators indicate they want consumers to be compensated. Cordray’s statement said the Consumer Finance Bureau had contacted the Office of the Comptroller of the Currency and the Federal Trade Commission, “to ensure a comprehensive response that addresses the situation quickly and holds accountable all of the parties involved to make consumers whole.” The bureau has instructed RushCard holders to ask that late fees be waived, but there is no way to ensure that merchants or utilities will do so. Savard has said RushCard will forgo service fees between Nov. 1 and Feb. 29, which can include as much as $10 in ATM swipe fees.
Daniel Ray, editor-in-chief of CreditCards.com, noted RushCard has been around since 2003 and has been “one of the stalwarts in its industry,” but likened RushCard to 19th century coal companies that paid workers in company scrip that could quickly turn worthless.
“The RushCard is an example of how a technical failure can turn prepaid cards into this century’s coal mine scrip,” Ray said. “In the lightly regulated prepaid card industry, the card is only as good as the company that backs it.”
After leaving thousands of consumers financially crippled for nearly two weeks, the RushCard problems highlight the risk of relying on a single financial service. “I hope,” Ray said, “that the good that comes from it is the recognition among consumers that they should not rely on prepaid cards as their only financial tool.”
As for Tanya Reasonover’s household, the party is back on for her daughter, but so is the search for another way to pay the bills.
“I was telling people to get the RushCard and everything,” Reasonover said. “I will never open my mouth like that again.”
Help for RushCard users
The Consumer Finance Protection Bureau advisers consumers to file complaints directly with UniRush or with the bureau. The bureau also has advised consumers to request that merchants and utilities wave any late fees or penalties in light of the service outage.
Phone: (855) 411-2372
RushCard: Email email@example.com or firstname.lastname@example.org