The Prepaid RushCard Declares a 4-Month Fee Holiday After Processing Glitch

UniRush LLC’s RushCard declared a four-month fee holiday over the weekend after a glitch during the prepaid card’s switch to a new processor that began Oct. 11 limited access to an undisclosed but apparently large number of customers’ accounts.

Cincinnati-based UniRush did not identify the processor. The glitch apparently started shortly after the RushCard, the brainchild of hip-hop artist and DefJam co-founder Russell Simmons, began its transition to a new processor, the company said in a blog post. According to social-media posts, some customers said they were locked out of their accounts for a week or more, and some accounts showed zero balances.

In an emailed statement to the media, RushCard chairman and chief executive Rick Savard acknowledged that things went wrong, but he didn’t say exactly what or how many cardholders were affected. He did say that the card’s fees would be waived from Nov. 1 through February 2016.

“In an ongoing effort to upgrade and create new services for our customers, RushCard underwent a technology transition to a new transaction-processing partner last Monday morning,” Savard said. “During this process, many of our customers were adversely affected when the technology that was used to transition their accounts did not work as planned.

“To those impacted, we can't begin to express both how sorry we are for the hardships that you've experienced and our commitment to making this right,” the statement goes on.

Savard said RushCard’s system is now “up and running and we are processing deposits and transactions. A small number of accounts are still in an inactive state.”

The company has set up “command centers” in New York City and Cincinnati “to begin outreach to those who remain affected,” according to Savard. He added that “we are not done yet” and that RushCard would have more to say “about how we will continue to make good on our customers’ trust.”

Simmons himself tweeted Sunday that the transition was 92% to 97% done, but “many people still disconnected … we won’t sleep until it’s right.” He urged cardholders to email him if they were still having problems.

The RushCard’s core cardholder base is primarily unbanked consumers, many of whom are lower-income members of minority groups. Ben Jackson, director of the Prepaid Advisory Service at Maynard, Mass.-based Mercator Advisory Group Inc., says the long fee holiday appears to be a new tactic.

“But it seems like [that is] what businesses do as part of helping unhappy customers,” Jackson tells Digital Transactions News by email. “In other words, if you have a bad meal in a restaurant they might give you a free one, or a problem with a flight might get you an upgrade or voucher for a free flight.”

The processing malfunction, however, comes at an inopportune time for the prepaid card industry, which often is criticized for its fees and is facing new rules from the federal Consumer Financial Protection Bureau.

“The bigger problem here is that a technical glitch is going to reflect badly on the prepaid industry,” says Jackson. “The popular press has already begun vilifying prepaid cards in general, when what happened was a technical problem, and not something fundamentally wrong with the product category.”