Menendez, Brown Demand Answers on Walmart Prepaid Debit Card Outage

Menendez, Brown Demand Answers on Walmart Prepaid Debit Card Outage

Senior Banking Committee senators call on Walmart, Green Dot and MasterCard to outline steps to prevent future service disruptions


WASHINGTON – U.S. Sens. Bob Menendez (D-NJ0 and Sherrod Brown (D-OH) today pressed Walmart, Green Dot Corp. and MasterCard to explain a recent system outage that purportedly blocked thousands of customers of Walmart-brand prepaid debit cards from accessing their money. The technical problems potentially prevented Walmart MoneyCard users from being able to get their paychecks or use their own money to pay bills, buy groceries or make rent.

Menendez, a senior member of the Banking panel, and Brown, the ranking member of the Senate Banking Committee, outlined their concerns in letters to the chief executives of Walmart; Green Dot, the company that issues Walmart's MoneyCards; and MasterCard, which is Green Dot’s transaction processing partner. The Senators asked the executives to explain how the problem happened, how many customers in Ohio and New Jersey were affected, what reimbursement the companies will offer to harmed consumers and the steps the companies are taking to prevent a similar slowdown in the future.

The Senators noted that Green Dot, with over 4.5 million active cards, has far more customers than RushCard, the prepaid card firm that experienced an outage last year. RushCard agreed last month to pay $19 million to compensate its customers for a technical breakdown that temporarily locked up to 440,000 people out of their accounts for more than two weeks.

“RushCard’s customer base is approximately half a million, a fraction of the size of Green Dot’s customer base,” the Senators wrote. “As with RushCard, many customers that use Green Dot are underserved by the financial system … A large proportion of unbanked households rely on prepaid cards for the same purposes that households associate with checking accounts: to pay for everyday purchases or bills and to receive paychecks.”

The Senators also praised the Consumer Financial Protection Bureau (CFPB) for moving closer to finalizing rules to bolster oversight of the prepaid card market.

“These service interruptions are a clear indication that more oversight and consumer protection is needed in the prepaid card market. We are encouraged that the CFPB proposed rules to regulate prepaid cards, in order to ensure fair dealing in this market,” the Senators wrote.

Click here for the Senators’ letter to Green Dot and Walmart. Their letter to MasterCard is available here.

In May, customers who use the Green Dot Walmart MoneyCard experienced an interruption in service, reportedly due to a slowdown in transaction processing by Green Dot’s payment processor, MasterCard. The Senators pressed the companies to provide a timeline of the disruptions and to distinguish the circumstances of the glitch from the problems that RushCard experienced last year.

Green Dot is one of the largest prepaid card companies in the market; its products are available online and at more than 100,000 locations nationwide. Walmart is Green Dot’s largest retail distributor, with 46 percent of Green Dot’s operating revenues derived from products and services sold at Walmart.

The Senators also called on the companies to explain how the forced arbitration provision in Green Dot’s products will impact consumers. These clauses, often buried in the fine print of checking accounts, private student loans, credit cards, and other contracts, prevent consumers from taking companies to court or participating in class action lawsuits when a dispute arises.

Following a push from Brown and Menendez, the CFPB recently proposed rules to eliminate the use of forced arbitration clauses in financial services products. The Senators are cosponsors of the Arbitration Fairness Act of 2015, which would make forced arbitration agreements unenforceable in the case of employment, consumer, antirust, or civil rights disputes.