TSYS’s Netspend Unit To Pay $53 Million As Part of FTC Settlement

Netspend, the prepaid card unit of processor Total System Services Inc. (TSYS), will pay $53 million as part of a settlement it reached with the Federal Trade Commission over allegations concerning how it handled some marketing materials.

The settlement, announced Friday, calls for Netspend to set aside $40 million to refund consumers and to pay $13 million in fees.

The action stems from a lawsuit filed in November that alleged Netspend promised “immediate access” to funds loaded onto cards and “guaranteed approval,” but failed to provide that for many consumers. The number of affected accounts is known to the was not available because Netspend claimed in November the information was confidential.

In a statement, Netspend admitted no wrongdoing. “Netspend is pleased to have resolved this matter,” the statement noted. “We agreed to settle in order to avoid the significant costs associated with protracted litigation and to get back to the business of serving our customers. We do a great deal to encourage card activation and comply with federal law, and we welcome this opportunity to assist those who have not activated their accounts.”

Within 60 days, Netspend must send notices to all consumers affected by the settlement.

Also as part of the settlement, Netspend must ensure it does not misrepresent the length of time for customers to access funds or what it necessary for guaranteed approval of an account. Netspend must send notices to marketers of its products that includes the notice of the court order, with stickers to alert consumers.

The commission’s vote to approve the order was 2-1, with acting chairman Maureen K. Ohlhausen dissenting. “Deceptive advertising claims hurt consumers and competition,” Ohlhausen wrote. “Conversely, truthful advertising claims benefit consumers by helping them identify and differentiate products and services, thereby spurring competition. When, as in this case, the FTC misses the mark in its deceptive advertising enforcement and instead prohibits or limits truthful claims, we harm consumers and competition.”