MasterCard emerges as a player in the RushCard debacle

Image: Reuters/Jonathan Bainbridge
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This post has been updated.

A MasterCard subsidiary was part of a fumbled handover that left many customers of hip hop mogul Russell Simmons’ prepaid debit card unable to access their funds or balances earlier this month.

Although Simmons has said the cards, known as RushCard, are now fully functional, there are still plenty of questions remaining over what exactly went wrong. And the problems with the card underscore broad concerns about the growth of prepaid cards, which many poorer, underbanked Americans have come to rely on in recent years.

RushCard’s explanation for the outage—which left an unspecified number of RushCard’s unable to access their money for more than a week in some cases—is that a computer glitch disrupted the transition to a previously unnamed payment processor.

The processor in question is MasterCard’s Integrated Processing Solutions unit. While RushCard parent UniRush operates the cards, Visa provides the brand name and transaction network, and Storm Lake, Iowa-based Metabank holds the funds deposited on cards, MasterCard’s job as payment processor is to move the money around.

It is not unheard of for a prepaid-card company to have some technical issues during processor transitions, Metabank CEO Brad Hanson told Quartz, but not to this scale. Usually, he said, customers might lose access to their cards for a few hours, but not the days and weeks that some RushCard users have described on social media and in news reports.

“We ran into a glitch, which turned into a waterfall problem,” he said. “This one had a bit more of a direct impact than usual.”

UniRush and its previous processor, Total Systems Services (TSYS), had a relationship that went at least as far back as 2009. A TSYS spokesperson said RushCard’s problems did not stem from its role in the transition to MasterCard.

“The issue has nothing to do with TSYS or the prior relationship we had with Rush Card,” he wrote in an email.

MasterCard confirmed that it is UniRush’s payments processor but directed further questions to UniRush, which did not return requests for comment. The credit card giant has previously celebrated its growth in the prepaid debit card industry, touting its global reach. In an investor meeting in September, chief products officer Craig Vosburg said, ”nearly half of all prepaid volumes are being transacted on MasterCard branded products around the world.”

Prepaid giant Green Dot severed its TSYS relationship after nearly two decades to head to MasterCard as well. That transition, which has been in the works for almost two years, isn’t expected to be finished until June 2016. MasterCard also operates the Direct Express prepaid debit cards through which the Treasury Department disburses Social Security, Veterans Affairs, and other federal benefits for the unbanked, though it is not the processor for that card.

The disruption, which has primarily affected the RushCard’s unbanked and underbanked customers and left them unable to receive direct deposits from employers or move money between cards, has drawn regulatory scrutiny and a class-action lawsuit. As consumer protection groups call for additional federal oversight of the prepaid card industry, the Consumer Financial Protection Bureau announced Friday that it was looking into the situation.

“We have stressed that RushCard and its relevant business partners must ensure that no other consumers will be denied access to their funds,” said CFPB director Richard Cordray in a statement. “Further, we indicated that the CFPB is prepared to use all appropriate tools at our disposal to help ensure that consumers obtain the relief that they deserve.” The agency did not return a request for comment regarding whether it had contacted either TSYS or MasterCard.

The CFPB has not announced an investigation into UniRush, but the agency said it had been in touch with the Federal Trade Commission and the Office of the Comptroller of the Currency regarding responses to the situation and possible future safeguards against similar problems.

Update: This post has been updated to clarify the relationship between MasterCard and Direct Express.