Russell Simmons and the company behind his embattled prepaid debut card, RushCard, is creating a “multi-million dollar” fund to help compensate customers who were unable to access their money following technical problems earlier this month.
Customers who prove they incurred late fees, lost a deposit on an apartment, or suffered any financial setback as a result of the debit card problems will be compensated, the company said Thursday.
“This whole situation has been devastating for them, and we want to make sure they are made whole,” Simmons told the Associated Press.
According to a class action lawsuit filed against the company on Friday in U.S. District Court in New York, RushCards are mostly used by “poor and working class Americans” who don’t have traditional bank accounts. Judging by the user profiles of angry customers posting comments on the RushCard Facebook page, many of those cardholders are African-American.
Adding to Simmons’ problems, federal authorities are now looking into the RushCard meltdown.
The RushCard debacle started after the company switched from one processing provider to another over the Columbus Day weekend. Customers reported their cards were declined. In some cases, money went missing from accounts.
Founded by Simmons in 2003, the RushCard can be used to make payments and withdraw cash at ATM machines without being linked to a traditional bank account. Simmons has touted his product as a lifeline for the disadvantaged who are often unable to open a regular account because of poor credit or financial hardship.
But some critics say the the only people who benefit from these cards are Simmons and his business partners, with customers paying up to a dollar a swipe and anywhere from 50 cents to $1 just for a balance inquiry.
“This is a card with predatory practices like charging people every time they swipe,” Joe Valenti, director of consumer finance at the Center for American Progress, told TheWrap on Tuesday. “Like other celebrity cards, this card has earned a shady reputation.”
The RushCard debate has become a P.R. nightmare for Simmons, sweeping through social media over the last few days. Simmons’ Twitter and Instagram accounts became places for RushCard customers to air their grievances and try and get their money.
“I’m done with Rushcard,” wrote one exasperated user. “I have been a customer for over 10 years this just took the cake yes I’m furious!!!”
Since Oct. 12, Simmons has issued numerous apologies and even phoned and direct-messaged affected users on Twitter.