Technical Glitch Leaves RushCard Owners Unable To Access Funds
AUDIE CORNISH, HOST:
Thousands of Americans, perhaps hundreds of thousands, have had trouble accessing their money over the last week. They're overwhelmingly poor and use a prepaid debit card called the RushCard.
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RUSSELL SIMMONS: We know who you are and know you are facing tremendous challenges. I want to personally reassure you that your funds are safe and that we are addressing every issue as quickly as possible.
CORNISH: That's from a video apology recorded by music and fashion mogul Russell Simmons last week. He founded RushCard more than 10 years ago. He says a technical glitch froze customer accounts. For more, Gillian White is here. She's senior associate editor for business stories for The Atlantic. Welcome to the program.
GILLIAN WHITE: Thanks so much for having me.
CORNISH: So we've heard reports of people being unable to pay for medications and for food. Do you know how many people, exactly, were impacted by this glitch?
WHITE: The company isn't actually giving out very specific numbers. Their users are definitely in the six figures. And it sounds like pretty much everyone who has a RushCard was affected. So we are talking, probably, hundreds of thousands.
CORNISH: In the financial industry, when they talk about prepaid debit cards, they often talk about those customers being unbanked and under-banked. What does that mean?
WHITE: It means that they don't have the money to sustain a checking account. They don't have the necessary credit to keep up a credit line. Prepaid cards kind of fill that role where you can have money direct deposited onto it. You can load money yourself, and then you can use it in places where a debit card - in this case, a visa card - would be accepted.
The problem there is that it has fees that aren't necessarily associated with normal bank debit cards. So you can get charged per transaction just for using the card. You can get charged for loading money onto the card. And some of those requirements aren't necessarily outlined very clearly users.
CORNISH: So the funds that the RushCard holds are FDIC insured. But beyond that, does it face, like, the same regulations as a bank?
WHITE: So there are definitely some discrepancies in regulation. So in terms of transparency about fees, in terms of how they deal with issues like this where people haven't had access to their money for a prolonged period of time, the RushCard company is not actually required to front that money if they can't figure out how to get the funds back to people in a specific period of time. When you have a bank account and your credit card or your debit card doesn't work, you can just go to a teller and give your account number and get some money out. That's not the case with RushCards.
CORNISH: Now, as you've written, the Consumer Financial Protection Bureau started looking into these cards last year and actually proposed more oversight. But has anything come out of that?
WHITE: So right now, that's still in the proposal phase. So the protections that they would add on, which is some of the greater transparency and forcing these companies to be more accountable - it's not actually actionable yet. But what the CFPB has done in the past 24 hours is put out some statements about this saying that they're very concerned, that they're going to look into the issue, giving people some guidance and also telling people that they can file complaints with the CFPB. So they may be able to take some action on that.
CORNISH: Now, do you think more people would've paid attention to this if it was Chase or Bank of America, right? I mean, we're talking about hundreds of thousands of accounts. But is there the same pressure on this company?
WHITE: I think absolutely, at the time of the glitch, there wasn't. So the people who use prepaid cards - that's about 12 million people. There's about $65 billion on those cards. But prepaid cards are targeted at African-Americans. Their users make less than 30,000 in general. This is a group that is largely marginalized by the financial industry in the first place. So people aren't paying as much attention as they would if it was a Chase or a Citibank or someplace else where a more diverse group of people, both ethnically and financially, were holding their money.
CORNISH: RushCard says its technical issues are resolved, but there are still a ton of people tweeting. Picture - I saw one - a picture of a crying baby with a text, I'm hungry; give my dad his money. Is this really over?
WHITE: So when I spoke with the company, I was told that there's a small number of people who are still unable to use their cards. But of course, people are saying that that's not really true. A lot of people have tweeted to me and emailed me to say that despite receiving a replacement card, they haven't been able to actually activate that card or receive their funds. So there is some discrepancy between how resolved the company is saying it is and how resolved, you know, people who have taken to social media are saying it is.
CORNISH: Gillian White of The Atlantic - her piece on the problems with RushCard is called "The Computer Glitch That's Keeping Poor People From Their Money." Thanks so much for speaking with us.
WHITE: Thanks for having me.
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