The Consumer Financial Protection Bureau has ordered a leading prison banker to pay $6 million for siphoning off taxpayer-funded benefits and forcing recently incarcerated individuals to pay hidden fees, according to an agency announcement posted Tuesday afternoon.
The CFPB concluded that JPay “engaged in unfair and abusive acts” by attaching fees to cards that people were required to receive as they left prison. The company also deceived consumers about the fees themselves, CFPB concluded.
Jade Trombetta, a JPay spokesperson, said the company was pleased to have reached a settlement with the CFPB and promised that some of the company’s past business practices will be discontinued.
“JPay cooperated fully with the CFPB in this matter, guided by our organization’s transformation agenda that emphasizes working collaboratively with regulators, reforming certain past business practices, and making products and services more affordable and accessible,” Trombetta said in a statement.
Trombetta added that leadership teams at JPay and its parent company have prioritized giving incarcerated people low-cost services “with an emphasis on preparing them for successful reentry and return home.”
Platinum Equity partner Mark Barnhill said the company has already adopted “an aggressive change agenda” that includes cooperation with regulators and “correction of certain past practices.”
JPay was founded in 2002 as an electronic money-transfer service for inmates and their families, who would use it to send money for items such as toothpaste, medical care and clothing. Some prisoners have become increasingly reliant on it as states look to make inmates responsible for their living expenses.
The company later expanded to dozens of states and more than 1,000 facilities. In 2013, it turned a profit on revenue of more than $500 million, the company’s chief executive told CNBC. It later came under the ownership of Platinum Equity Partners.
The CFPB settlement focused on agreements that required prisoners to set up an account with JPay before they can receive their “gate money,” referring to state benefits provided to those leaving prison. The agency concluded that fees attached to those debit cards were in some cases different from the ones disclosed on the recipients’ cardholder agreements.
The settlement order requires JPay to give consumers $4 million and pay a civil penalty of $2 million. The agency also severely limited the fees the company can charge in the future. Under the terms of the agreement, JPay can’t attach any fees to its release cards except for an inactivity fee after 90 days.