The US Federal Trade Commission (FTC) has initiated the refund of around $10m to more than 430,000 customers who were not able to access money deposited to NetSpend prepaid debit cards.

Cardholders could not access their funds as NetSpend denied or delayed card activation or blocked them from using it, the FTC complaint said.

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Court battles for FTC refunds

To settle the charges, NetSpend agreed to notify and give refunds to eligible customers who requested before 7 October 2017.

In addition, the card issuer agreed to remit any fees collected from its prepaid debit cards that were eligible for refund, but were not paid out during the consumer redress period.

The FTC said that this money will be used to send checks to customers who did not previously get a relevant refund.

NetSpend was sued by the FTC in November 2016 for deceiving customers on access to funds deposited to their prepaid debit cards.

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This happened when NetSpend claimed in its marketing materials and website that its cardholders will have ‘immediate access’ to the money, which will be ‘always available’.

The FTC complaint added that consumers were put through an identity verification process and most of them had difficulty satisfying the requirements.

It was further said that denial of access to customer’s money led to severe financial hardship, including evictions and car repossession.

FTC director of Bureau of Consumer Protection Jessica Rich said: “Innovative financial products can offer many benefits to consumers. However, when companies promise consumers ‘immediate access’ to their funds, they need to honour those promises.

“We’re committed to protecting consumers – particularly those who are financially strapped – from deceptive practices involving their payment choices.”