The attorney general issued subpoenas to force the companies to divulge information about hidden fees they possibly charge on prepaid debit cards. The subpoenas aimed at San Ramon, Calif.-based AccountNow and Cincinnati-based UniRush ask the companies to support published statements that using prepaid debit cards help card users improve credit scores.
"Failing to disclose fees is essentially stealing money from consumers," Bondi said in a statement. "We will aggressively investigate these practices and ensure [consumers] are protected from hidden fees and charges."
The subpoenas gave the companies until June 20, 2011, to respond.
The attorney general's spokeswoman Jennifer Krell Davis told SellingPrepaid that consumer complaints, together with media and trade reports, convinced the attorney general to look at the prepaid card industry. Davis said the preliminary inquiry included buying prepaid cards from retailers and studying whether the products matched advertised promises.
Reaction to the news was swift. According to published reports, Green Dot's stock price fell 5 percent and NetSpend's declined 10 percent on the day the investigation was announced. First Data spokesman Andy Payment confirmed that the Greenwood Village, Colo.-based acquirer received the subpoena and is reviewing it. NetSpend spokeswoman Suzanne Dawson said her firm has nothing to hide.
"NetSpendâ€™s mission is the empowerment of its customers," she said. "We design all of our marketing materials and other consumer disclosures to meet or exceed all of the requirements of applicable federal and state law, and we are confident that any objective review of our programs and materials will result in the same conclusion.
"We are working cooperatively with the AG to answer their questions and help them see the quality of our disclosures to the customers we serve."
In a statement, the Network Branded Prepaid Card Association said it was "disappointed" to hear of the Florida Attorney General's decision to pursue an investigation of the prepaid card industry.
"NBPCA supports transparency in disclosure of fees to consumers, prior to purchase, so they clearly understand the terms and conditions associated with prepaid cards prior to purchase," the release said.
NBPCA President Kirsten Trusko added, "To ensure consumers enjoy their card experience and easily understand, in plain English, how prepaid cards work, NBPCA continues to work with federal regulators like the Consumer Financial Protection Bureau to develop educational and comparative tools to help consumers choose the best card, across a large group of competitive programs, to meet their specific needs."
Perhaps the company under the most pressure from the investigation is UniRush, the prepaid card company owned by Run DMC rapper Russell Simmons. UniRush markets general-purpose prepaid cards primarily to African-American and other minority communities in the United States.
"The RushCard is extremely transparent in terms of the presentation of its fees and its services," Simmons said in a statement. "All of the information is available for everyone to see on rushcard.com. Third-party research has shown that, for many customers, the best prepaid card services offer significant savings compared to what they would pay in traditional bank checking accounts, with savings of up to 50 percent.
"As I look at the payments landscape, I see the banks as the large record chains, and my RushCard is looking a lot more like iTunes. I welcome the public debate because the more educated the consumers are the more successful we become."
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