Netspend to Compensate Overcharged Customers in New York Settlement

Netspend, a leading provider of reloadable debit cards and payroll cards, has agreed to a settlement with the New York Attorney General's Office (OAG) to compensate tens of thousands of New Yorkers who were harmed by the company's illegal practices. The settlement, announced on January 31, 2025, requires Netspend to pay over $1 million in restitution and penalties, and to change its policies to comply with New York's consumer protection laws.



The OAG investigation found that Netspend violated numerous consumer protection laws, particularly those meant to protect low-income New Yorkers and those who receive benefits like Social Security and veterans benefits. Some of the key findings include:

1. Illegal Account Freezes and Funds Turned Over to Debt Collectors: Netspend froze customers' accounts and turned over their funds to debt collectors, even when the balances fell below the legal limit protected by New York's Exempt Income Protection Act.
2. Illegal Fees: Netspend charged illegal fees on its debit and payroll cards, including fees for inquiring about an account balance at ATMs, fees for attempting transactions at ATMs that were declined, foreign exchange fees, and more.
3. Paycheck Advance Program with Illegally High Interest Rates: Netspend operated a paycheck advance program that charged customers illegally high interest rates, with effective annual interest rates of over 300 percent in more than 4,000 cases.

As part of the settlement, Netspend will pay more than $735,000 to tens of thousands of New Yorkers who were affected by the company's illegal practices. Consumers who have active debit or payroll accounts with Netspend will have their accounts credited with restitution amounts, while those without active accounts will receive checks in the mail directly from the company. Netspend will also pay a penalty of over $350,000 to the state and change its policies to fully comply with New York laws.

New York Attorney General Letitia James stated, "Netspend took advantage of tens of thousands of consumers and even deprived vulnerable New Yorkers of their hard-earned benefits like Social Security. This settlement will return hundreds of thousands of dollars to New Yorkers and ensure that Netspend ends its illegal practices. I will not tolerate any company that tries to profit by defrauding New Yorkers, and we will continue to go after anyone who breaks our consumer protection laws."

The settlement is a significant victory for New York consumers, who will receive much-needed compensation for the harm caused by Netspend's illegal practices. The company's agreement to change its policies and comply with New York's consumer protection laws will also help to prevent similar issues in the future. As the investigation and settlement highlight, it is crucial for companies to adhere to the law and treat their customers fairly, especially those who are most vulnerable.