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04.05.17

Class Action Filed Against Bank over Prison-Release Cards

On March 28, a proposed class action lawsuit was filed in the District Court for the Southern District of California by a Georgia man stemming from a prepaid card he was given upon his release from custody. The lawsuit filed against First Century Bank N.A. and Stored Value Cards Inc. claims that cash belonging to persons detained in a correctional facility is returned to those persons upon their release via prepaid cards without the person ever being a given a choice. The complaint further alleges that the plaintiff’s card was subject to various unauthorized transaction fees and a weekly maintenance fee, which were never disclosed.

The use of prepaid cards to disburse funds to individuals released from correctional facilities has come under some scrutiny. As a result, some states have begun to introduce bills proposing requirements for these products. For example, Oregon has a proposed bill, OR S 355, which would prohibit correctional facilities from releasing funds in the form of a prepaid card unless the card does not impose inactivity fees or a fee when the card is used in a “transaction,” which the bill defines as a “purchase, a funds withdrawal or transfer and a card balance inquiry.”

In 2015, 18 U.S. senators led by Cory Booker (D-N.J.), sent a letter to the CFPB urging protections for prisoners released from jail who receive prepaid cards when they exit incarceration. The CFPB responded that it would not make special rules for prison-release cards but that such cards would fall under its final rule on prepaid accounts.

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