Netspend Settlement

By Jonathan Stempel

NEW YORK (Reuters) – Netspend, a provider of reloadable debit and payroll cards, will pay about $1.1 million to settle New York state accusations it illegally charged low-income customers exorbitant interest rates on paycheck advances and allowed debt collectors to seize their funds.

New York Attorney General Letitia James stated that her office identified over 6,900 cases where Netspend’s fees on paycheck advances resulted in effective annual interest rates exceeding 100%, with over 4,000 instances where rates exceeded 300%. This is significantly above the state’s 16% legal limit for unlicensed lenders.

Additionally, James noted that Netspend froze the funds of more than 80 customers and transferred them to debt collectors, violating state law that protects Social Security, unemployment, and other benefits from collections, which can be up to $3,840 for residents of New York City, Long Island, and Westchester County, and $3,600 for other residents.

Netspend also misled customers regarding various fees, including those for using automated teller machines.

The settlement comprises $735,670 in restitution and $357,775 in civil penalties and costs.

Founded in 1999, Netspend claims to have over 200 million registered accounts. It is owned by Ouro Global, which acquired a substantial portion of the former Netspend Corp in 2023.

Ouro stated it cooperated with the investigation conducted by James’ office and is pleased with the resolution. The Austin, Texas-based company emphasizes its commitment to empowering under-banked customers to thrive in the American economy.

Ouro’s business partners include CVS, Walgreens, Dollar General, Family Dollar, Mastercard, Visa, and sports teams like the Miami Heat, San Antonio Spurs, and Real Madrid.