The Federal Trade Commission (FTC) has charged reloadable prepaid card company NetSpend with deceiving customers about access to funds deposited on their debit cards, an allegation the company intends to “vigorously contest.”

In a 28-page complaint filed on Thursday in federal court in Atlanta, the FTC charged that NetSpend told consumers in its marketing materials that its reloadable prepaid debit cards offer an alternative way to store and immediately access their funds.

But the FTC alleges that once customers loaded funds onto their cards, many of them found they could not access their money, either because NetSpend denied or delayed activation of the card, or because it blocked consumers from using it.

“Innovative financial products can offer many benefits to consumers,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection.

“However, when companies promise consumers ‘immediate access’ to their funds, they need to honor those promises.”

Rich reminded payment companies that the FTC was committed to protecting consumers, especially those who are financially strapped, from deceptive practices.

TSYS, or Total System Services, a payment services company based in Columbus, Georgia, acquired Austin, Texas-based NetSpend in 2013 for about $1.4bn.

NetSpend accounted for 20 percent of TSYS’ revenues in the third quarter of 2016.

According to a quarterly earnings report released October 25, NetSpend posted third-quarter net revenue of $155.3m, an 11.2 percent increase from $139.6m in the same period last year.

NetSpend also claims consumers are “guaranteed approval” for a card. In fact, the FTC alleges many consumers did not receive access to their funds as promised.

According to the complaint, consumers must go through an identity verification process as required by law before the prepaid debit card can be activated, and many people have difficulty satisfying this requirement.

The FTC alleges many consumers who could not access their funds for weeks, or at all, suffered severe financial hardship such as evictions, car repossession, and late fees on bills.

In a statement, NetSpend denied the FTC’s allegations and said it has “substantial defenses” to fight the complaint.

The prepaid card provider said the issue in the complaint is whether consumers were deceived because of the company’s compliance with federal mandates under the USA PATRIOT Act.

NetSpend said it has to confirm the identity of those acquiring prepaid cards.

“NetSpend takes seriously and carefully adheres to these legal mandates to fight identity theft, money laundering and terrorist financing and believes that no one was deceived or harmed by the company’s compliance with these legal obligations,” the company said.

NetSpend said the complaint also relates to the company’s fraud control, which is required by federal law to monitor accounts for account takeover and possible fraud to protect consumer funds.

“These processes are not deceptive, but instead comply with the law and protect consumers,” the company said.

In addition, the FTC’s complaint alleges that consumers who closed accounts and requested refunds waited several weeks for their money. In other cases, consumers’ funds were allegedly depleted by company fees.

The FTC also alleges that NetSpend misrepresents that when customers dispute charges on their cards, it will grant provisional credit so they can access their funds while the error is resolved.

In many cases, however, NetSpend has failed to grant provisional credit as promised.

NetSpend’s statement did not address the additional charges in the FTC’s complaint.

The FTC seeks to return consumers’ funds and ensure NetSpend provides them with promised access to their funds in the future, the agency said in a statement.



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