For those of us who are regular readers of FTC press releases, the allure of last week’s announcement that the FTC settled its lawsuit against prepaid card company NetSpend Corporation may be more in the substance – or lack thereof – of the announcement itself. In four sentences, the FTC simply stated that the advertiser agreed to settle, that the Commission vote approving the final order was 2-1, and that Acting Chairman Ohlhausen issued a dissenting statement.
No details were provided about the claims at issue or the monetary relief imposed on the advertiser. And the FTC did not, as it often does, publish an ancillary blog on the FTC Business Center website to educate us (albeit entertainingly) on all of the terrible things that must not be done. Is this a sign of how case announcements will be handled under the Ohlhausen administration? For companies that settle with the FTC to avoid the expense and distraction of litigating with the government, a departure from condemnatory FTC press releases would be welcome.
As for the details of the NetSpend settlement, NetSpend agreed to pay monetary relief totaling “no less than $53 million” and agreed not to misrepresent certain features about its prepaid products, including how soon funds may be available; conditions necessary to gain approval for a prepaid account; account error resolution; and the comparative benefits of the company’s prepaid products to other payment accounts and payment methods. The settlement split the complex monetary penalty into $40 million to be refunded directly to consumers and $13 million paid to the FTC to cover fees charged by the company.
The 2-1 tally approving the final order reflected a vote of former FTC Chairman Edith Ramirez, leaving us to wonder if she left any other votes behind. Commissioner Terrell McSweeny also approved the NetSpend settlement.
Acting Chairman Maureen Ohlhausen issued a dissent stating that the order imposed monetary relief not sufficiently related to the allegedly deceptive conduct. She also objected to the way in which the majority analyzed NetSpend’s use of “immediate access” claims in its ads. The Acting Chairman indicated in her statement that limiting the dissemination of truthful claims harms consumers by inhibiting their ability to identify and differentiate products and services, which in turn stifles competition. These comments echo other recent statements by Chairwoman Ohlhausen that the FTC should refocus on ensuring that “our enforcement actions address concrete consumer injury.”
Separate from the issues raised in the NetSpend complaint, the FTC has in the past cautioned consumers about hidden fees associated with the use of prepaid cards, including activation fees, transaction fees, and monthly maintenance fees. Lately, however, the Consumer Financial Protection Bureau (the “CFPB”) has had the spotlight on prepaid card issues. Last October, the CFPB issued consumer protection rules that, among other things, impose “Know Before You Owe” disclosures to give consumers information about fees associated with a prepaid account. The CFPB prepaid rules would also require prepaid companies to offer consumers protections similar to those made available by credit card companies, such as error resolution and limitations on consumer losses for lost or stolen funds.
Whether or not the CFPB rules will take effect next October as scheduled remains in question as Senate Republicans have recently taken steps to repeal the rule under the Congressional Review Act. Problems cited by opponents of the CFPB prepaid rules include that the rules are overly broad and would increase compliance costs, stifle innovation, and ultimately result in higher costs to consumers. As some of these sentiments echo the concerns raised in Acting Chairman Ohlhausen’s dissent in the NetSpend case, prepaid cards appear to be a 2017 poster child for the more business-friendly views of the Trump Administration.
In the end, the NetSpend press release may be the first example of a shift. As Chairwoman Ohlhausen explained in a recent speech, “In every case we litigate, settlement we enter, report we write, guidance we issue, blog entry we post, and tweet we … twitter, we need to answer two questions. How were consumers harmed? And how does this action address that harm? This focus on consumer harm is part of our statutory mandate, but it is also good policy.”