(WNY News Now) The owner of Netspend Corporation, Ouro Global, Inc. (Ouro), and New York Attorney General Letitia James have negotiated a $1 million settlement over dishonest business practices that hurt thousands of New Yorkers.
NEW YORK Yesterday, Attorney General Letitia James of New York obtained more than $1 million and important changes from Ouro Global, Inc. (Ouro), the company that owns Netspend Corporation (Netspend), a supplier of payroll cards and reloadable debit cards. According to an investigation by the Office of the Attorney General (OAG), Netspend hurt tens of thousands of New Yorkers, most of whom were low-income, and broke multiple consumer protection laws. For several years, the business unlawfully closed its clients’ accounts and gave their money—which ought to have been safeguarded—to debt collectors. Additionally, Netspend ran a paycheck advance scheme that charged consumers unlawfully high interest rates and illegal fees on its payroll and debit cards that cost them hundreds of thousands of dollars. Tens of thousands of impacted New Yorkers will receive over $735,000 from Netspend as part of the settlement, and the company will also modify its operations to conform to New York’s consumer protection regulations. Additionally, Netspend will reimburse the state for more than $350,000 in fines.
Attorney General James claimed that Netspend exploited tens of thousands of customers and even denied needy New Yorkers their hard-earned benefits, such as Social Security. In addition to ensuring that Netspend stops its unlawful activities, this settlement will provide hundreds of thousands of dollars back to New Yorkers. Any business that attempts to make money by deceiving New Yorkers will not be allowed by me, and we will keep pursuing those who violate our consumer protection laws.
According to the OAG’s inquiry, Netspend broke state consumer protection laws, specifically those that safeguard low-income New Yorkers and those who receive Veterans’ and Social Security benefits. Under Netspend’s paycheck advance scheme, employees may get payments that were purportedly advances on future salaries. Nevertheless, Netspend’s fees for participants in this scheme were interest rates with high yearly expenses.The OAG investigation found over 4,000 instances where customers were charged an effective annual interest rate of more than 300 percent, despite the fact that New York law restricts annual interest rates to 16 percent for unlicensed lenders like Netspend and 25 percent for licensed lenders. The majority of these massive expenses were borne by New Yorkers who depended on the paycheck advance program on a regular basis, the research also found.
Additionally, the OAG investigation discovered that Netspend enabled violations of the Exempt Income Protection Act in New York. Up to a certain amount—$3,840 for residents of New York City, Long Island, and Westchester County, and $3,600 for all other New York residents—state or federal benefits, including Social Security, Veterans’ benefits, disability insurance, and unemployment insurance, are shielded from debt collectors under this law. By blocking clients’ accounts and permitting debt collectors to take their money, even when it was below the legal limit, Netspend disregarded this rule.
For instance, Netspend blocked a New York customer’s bank account in January 2019 with a balance of $1,008.52, which was far less than the allowed amount. When the customer contacted Netspend and told them that the account restraint was unlawful in New York, Netspend misreported that the court order required the account to be restricted for a year. To release the remaining funds from the unlawful freeze, the customer had to pay the debt collector more than $600 from the account.
Additionally, Netspend levied a variety of unlawful fees and mislead its clients. Customers believed they could avoid all fees by utilizing in-network ATMs because Netspend’s marketing materials deceived them about the fees that would be incurred when using a Netspend card. In actuality, Netspend made millions of dollars by charging fees for every ATM transaction. After those fees were outlawed in New York, Netspend additionally charged its payroll card users a variety of unlawful costs, such as fees for using an ATM to check the balance of their account, fees for attempting unsuccessful transactions at an ATM, fees for foreign currency, and more.
As part of the settlement, Netspend will reimburse approximately $735,000 to tens of thousands of New Yorkers who paid fees for advance payments on their paychecks in violation of New York law, were charged unlawful fees, or had their money unlawfully transferred to debt collectors. While customers without active accounts will get payments in the mail straight from Netspend, individuals with current payroll or debit accounts will have restitution amounts deposited to their accounts. As part of today’s settlement, Netspend must also modify its operations to properly conform to New York law and pay the state a penalty of more than $350,000.
All customers who have had their bank accounts unlawfully blocked or cash unlawfully transferred to creditors are urged by Attorney General James to contact OAG and share their stories.
Assistant Attorney General Chris Filburn of the Consumer Frauds and Protection Bureau is handling this case. Chief Deputy Attorney General Chris D. Angelo and First Deputy Attorney General Jennifer Levy are in charge of the Division of Economic Justice, which includes the Consumer Frauds and Protection Bureau, which is headed by Bureau Chief Jane M. Azia and Deputy Bureau Chief Laura J. Levine.