Netspend, a provider of reloadable debit and payroll cards, has agreed to pay approximately $1.1 million to settle accusations from New York State regarding illegal practices. New York Attorney General Letitia James announced on Thursday that Netspend will address concerns about charging low-income customers excessive interest rates on paycheck advances and allowing debt collectors to take their funds.
James revealed that her office identified over 6,900 instances where Netspend’s fees on paycheck advances resulted in New Yorkers facing effective annual interest rates exceeding 100%. Moreover, more than 4,000 instances showed rates surpassing 300%, far beyond the state's legal limit of 16% for unlicensed lenders. Additionally, Netspend froze over 80 customers' funds and transferred them to debt collectors, disregarding laws protecting Social Security and other benefits, which shield up to $3,840 for residents of New York City, Long Island, and Westchester County, and $3,600 for other residents.
The investigation also uncovered that Netspend misled customers about various fees, including those associated with using ATMs, James noted. The settlement involves $735,670 for restitution and $357,775 for civil penalties and costs.
Established in 1999, Netspend claims to have over 200 million registered accounts and is currently owned by Ouro Global, which acquired a large portion of the former Netspend Corp in 2023. In response to the settlement, Ouro stated that they collaborated with the probe and achieved a favorable outcome. The Austin, Texas-based company stated that its objective is to support underbanked customers in accessing and succeeding in the U.S. economy.
According to its official website, Ouro has notable business partners, including CVS, Walgreens, Dollar General, Family Dollar, Mastercard, Visa, and renowned sports teams such as the Miami Heat, the San Antonio Spurs, and Real Madrid.