New York's Attorney General Letitia James struck a deal with Ouro Global, Inc., the parent company of Netspend Corporation, to the tune of more than $1 million in relief and reforms. This announcement, made earlier today, came after an investigation highlighted how the company had been charging illegal fees and engaging in misleading practices that predominantly affected low-income New Yorkers. According to the official press release, Attorney General James said, "Netspend took advantage of tens of thousands of consumers and even deprived vulnerable New Yorkers of their hard-earned benefits like Social Security."
The settlement, totaling over $735,000, will go directly to the tens of thousands of consumers who were wronged, in addition to more than $350,000 in state penalties. Netspend's practices included illegally freezing accounts and handing over protected funds to debt collectors, contrary to New York’s Exempt Income Protection Act. Attorney General James reiterated her resolve in the official press release, "This settlement will return hundreds of thousands of dollars to New Yorkers and ensure that Netspend ends its illegal practices. I will not tolerate any company that tries to profit by defrauding New Yorkers, and we will continue to go after anyone who breaks our consumer protection laws."
The investigation by the Office of the Attorney General (OAG) also brought to light a paycheck advance program operated by Netspend, that offered payments considered to be advances on future wages. However, the fees charged equated to annual interest rates sometimes exceeding 300 percent, far beyond the lawful limits set by New York state which are 16 percent for unlicensed lenders and 25 percent for licensed ones. Over 4,000 cases were identified where consumers fell prey to these exorbitant rates.
In one particularly egregious instance, a New Yorker’s account containing a mere $1,008.52 was frozen by Netspend, significantly below the legal threshold for protection against debt collectors. Despite the consumer’s contention that the freeze was not lawful under New York’s statutes, Netspend purportedly insisted that the account had to remain blocked for one year "per the court order," which resulted in the consumer paying over $600 to release their own funds. Additionally, the company was reprimanded for misleading customers about ATM fees and charging a plethora of prohibited fees on payroll cards including, but not limited to inquiries about account balance at ATMs, declined transactions, and foreign exchange fees.
With the settlement in place, consumers with active accounts at Netspend will receive account credits, and those without will receive checks mailed to them by the company itself. Victims of these practices have been encouraged by Attorney General James to report their experiences to the OAG. The settlement also necessitates that Netspend updates its policies to adhere strictly to New York laws, a measure aimed at preventing similar occurrences in the future.
