Russell Simmons’ RushCard leaves vulnerable flat broke

Guest essay by Heather R. Andrews: Broken promises as a prepaid debit card pitched, with hip-hop cred, to poor consumers breaks down.

Def Jam co-founder and RushCard promoter Russell Simmons.

Def Jam co-founder and RushCard promoter Russell Simmons.

October 12th, 2015 marked the beginning of what can only be described as a nightmare for customers of a prepaid debit card service called “RushCard,” which has been heavily promoted by early hip-hop mogul Russell “Uncle Rush” Simmons.

Customers often arrange for their paychecks to be deposited directly to the card accounts. Now, due to a “software upgrade in the transaction processing system” – also described as a “glitch” or a “conversion” – customers have been experiencing a $0 balance on their cards or had no access to their funds.

For many of this particular card’s customers, being locked out of their account for days means they are not able to pay bills or buy essentials such as diapers, medicine, or food. Some customers are left with no other options and have resorted to crowdfunding.

Slowly the story has been percolating into mainstream media, but only minimally and very late. Lack of coverage, along with form letter style responses from Russell Simmons and RushCard employees, have only added to customers’ desperate frustration.

Customers have been instructed to send Simmons himself direct messages via Twitter to resolve their issues. Many customers created Twitter accounts to voice their concerns, receive assistance from any source available, and to DM Russell Simmons — as directed.

I have been tracking and boosting these messages for several days on Twitter. Card holders are tweeting about late fees, repossessions, utility disconnections. Along with the stories came pleas for Russell Simmons to do something. As of yet, no one is reporting that they have been assisted by Simmons or anyone on his team.

Simmons did issue an apology last Wednesday. In part:

“I want to personally reassure you that your funds are safe and that we are addressing every issue as quickly as possible. I deeply apologize for the hardship this is causing and give you my solemn commitment that we will fix these problems.”

 
As of yesterday, on day 9, customers were still waiting for Russell Simmons to fix those problems. Meanwhile, those funds remained unavailable for immediate use on bills and necessities.

So where did this problem come from? Not the technical problem, but rather the problem of a service with such a vulnerable consumer base that could ill afford a “glitch.”

RushCard/UniRush, a financial services company and one of the first providers of prepaid debit cards, was founded in 2003 by Russell Simmons, one of the co-founders of Def Jam Recordings and numerous other business ventures. By 2011, on the strength of claims that the card would financially empower its customers and promote financial literacy, UniRush had amassed a reported 1.5 million customers.

UniRush’s success has not been without its issues already. Even before this most recent problem, RushCard has come under fire for its high fees, bad customer service, and predatory marketing strategies.

Moreover, Simmons used his image and influence to appeal to the Black community. His target market specifically was “underbanked Americans.” The underbanked are low-income individuals and families with limited access to banking services by geographic location, credit history, discrimination, or other factors. These consumers were drawn in by UniRush promising no credit checks, $5.00 credits, designer logos, and the ability to receive direct deposits up to 2 days earlier. For the poorest Americans, already saddled with consumer debt and struggling to make ends meet, these little things could make a difference, however briefly. Read more

Transatlantic regulators lay fines for foreign exchange cheats

Big fines Wednesday morning on five big investment banks from US and UK financial regulators for transatlantic currency trading collusion:

It’s another dark day for the banking sector, with several of the world’s biggest financial institutions being fined for their role in rigging the global foreign exchange market.

…regulators on both sides of the Atlantic have announced fines totalling around £2bn, or $3.1bn, against HSBC, Royal Bank of Scotland, UBS, JP Morgan and Citigroup.

The UK’s Financial Conduct Authority [FCA] has imposed fines totalling £1.1bn, and America’s [Commodity Futures Trading Commission] CFTC has imposed fines of an additional $1.4bn, (£900m).

All five banks have been penalised because their staff colluded to fix the official rates at which currencies were trading against each other in the international markets.

 
I’m sure they still probably made a lot more money off the collusion and manipulations than they’re being fined, but at least there’s a bit of justice.

But the real takeaway? Good lord, even Britain’s financial regulators at the FCA produce better videos (watch below) than Americans do. It’s like a dry BBC comedy but for white collar crime. Somehow they manage to make an incredibly dull description of illegal transaction activities into a gripping and funny set of infographics and deadpan reading of curse-filled chat transcripts by bankers.


 
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Another win for the Credit CARD Act of 2009

In May 2009, President Obama signed into law the Credit Card Accountability Responsibility and Disclosure (CARD) Act, a reform package to protect American consumers from abusive practices, misleading advertising and marketing, and more.

Some elements are enforced by the Federal Trade Commission, an independent regulatory agency dating to the Wilson Administration in the early 20th century Progressive Era. The rest is now enforced primarily by the Consumer Financial Protection Bureau created by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The Bureau, perhaps best known for being a major agenda item by Elizabeth Warren before she ran for Senate, is under the aegis of the Federal Reserve, another Progressive Era institution.

The Credit CARD Act, which passed with bipartisan support not long after the height of the credit crunch and the credit carpet being pulled from under average American consumers, sought to curb a wide range of problematic behaviors by the card companies.

  • Bans Unfair Rate Increases
  • Prevents Unfair Fee Traps
  • Plain Sight /Plain Language Disclosures
  • Accountability
  • Protections for Students and Young People

It also outlined some core principles for regulatory enforcement of the law:

  • First, there have to be strong and reliable protections for consumers.
  • Second, all the forms and statements that credit card companies send out have to have plain language that is in plain sight.
  • Third, we have to make sure that people can shop for a credit card that meets their needs without fear of being taken advantage of.
  • Finally, we need more accountability in the system, so that we can hold those responsible who do engage in deceptive practices that hurt families and consumers.


Since the Credit CARD Act took effect, there have been a number of rulings and enforcement orders by Federal regulators against some of the credit card companies for failure to comply with consumer protections. These include failure to limit consumer fees and charges as required or to change policies on issuance of credit cards to minors and students, as well as violations of restrictions on fees and other terms of gift certificates, store gift cards, and general-use prepaid cards. Companies have also had to ensure their advertisements for private credit reports disclose that free credit reports are already available under Federal law.

Capital One, a particularly egregious employer of abusive practices and a well-known (even notorious) marketer of all kinds of cards and credit services, has been one example of a company forced to settle. The venerable American Express has also been forced to make big payouts for attempting to manipulate settlements and for other violations.

The latter got hit with another order today from the Consumer Financial Protection Bureau — which is good news for the consumers they have misled:

The Consumer Financial Protection Bureau has ordered American Express to pay more than $75 million to settle claims that it charged improper fees and misled its credit card customers over so-called add-on products like identity fraud protection.

American Express will have to refund $59.5 million to more than 335,000 consumers over what the bureau called “illegal credit card practices.” American Express will also have to pay a $9.6 million cash penalty to the bureau, according to a statement issued on Tuesday.

The Dealbook/NYT article above details which practices were cited in the enforcement order from the CFPB. Last year’s settlement by American Express was even bigger, at $85 million.

While it’s unfortunate that AmEx is still trying to mislead its customers and potential customers, in violation of repeated actions by the Bureau and other regulators, the system seems to be working better than before the Credit CARD Act was passed in 2009. Moreover, according to Warren, within the first year or so, most companies began complying with — or even going beyond — the law’s requirements. On balance, consumers are being better protected. And that’s great news for everyone.