“The CFPB is taking direct action to get to the bottom of this situation that may have harmed thousands of innocent consumers already,” Director Richard Cordray said in a statement.
It is unclear what specific actions the CFPB is considering.
The Federal Trade Commission and the Treasury Department’s Office of the Comptroller of the Currency are also looking into the matter, Cordray said.
RushCard didn’t respond to a request for comment Friday and did not answer earlier questions about how many people were affected. RushCard CEO Rick Savard said Thursday the company was making plans to help its customers, who he said “were severely inconvenienced and in some cases suffered hardships.”
The company said in a release Thursday that the technical problems were fixed, but a handful of people were still having trouble.
The problems began when RushCard changed computer systems on Oct. 11, the company said. Some customers had problems as late as Thursday, as cards declined, direct deposit payments bounced back and accounts showed zero balances.
The situation highlights the legal grey area pre-paid cards occupy. They work like debit cards, but consumers who use them don’t have some of the same protections as someone with a traditional bank account. Regulators have expressed concern over the high fees associated with the cards, and have proposed to increase oversight. But those rules are not yet in place.
Meantime, pre-paid cards have surged in popularity. In 2013, they were used for 3.3 billion transactions, more than doubling their use in just four years, Cordray said last year.
And, regulators say, they are used disproportionately by people who don’t have access to traditional bank accounts. RushCard’s co-founder, rap legend Russell Simmons, has said he started the company, which was created more than a decade ago, “to financially empower those families that have been shut out of the economic mainstream.”
The company has changed its fee structure over the years to make the RushCard more affordable.
“Many of these pre-paid customers are living paycheck to paycheck and are engaged in a constant battle to make ends meet,” Cordray said in November. “They are some of the most economically vulnerable among us.”