Netspend Settles $1M for Exploiting Low-Income New Yorkers

A billion-dollar fintech firm, Netspend, has agreed to a significant settlement with regulators, totaling over $1 million. The company, which provides reloadable debit cards and payroll cards, has been accused of violating numerous consumer protection laws and charging "outrageous" interest rate fees, primarily affecting low-income individuals in New York.

New York Attorney General Letitia James announced the settlement, stating that Netspend had illegally frozen customers' accounts and turned over their funds to debt collectors. The firm also charged illegal fees on its debit and payroll cards, costing customers hundreds of thousands of dollars. Additionally, Netspend operated a paycheck advance program that charged customers illegally high interest rates.

As part of the settlement, Netspend has agreed to distribute $735,000 to tens of thousands of customers. People with active debit or payroll accounts at Netspend will have their accounts credited for restitution, while those without active accounts are expected to receive checks in the mail directly from the company. The firm will also pay over $350,000 in penalties directly to the state and change its policies to comply with New York's consumer protection laws.

Netspend's consumer business was acquired by Rêv Worldwide and Searchlight Capital Partners for $1 billion in 2023. The firm now operates under a new parent company called Ouro.