Russell Simmons' Card Glitch Keeps Thousands from Their Cash

Thousands of customers of pre-paid debit cards backed by hip-hop mogul Russell Simmons remain without access to their money more than a week after technical problems first began plaguing the cards.

Customers of the so-called RushCard, a pre-paid debit card aimed mostly at people without bank accounts, say they have missed car payments and worse. Some say they have been unable to purchase food or important items for their families.

"I've had to depend on my sister to buy things for my child," said Deandra Slater, a 31-year-old single mom from Chicago, who hasn't been able to access her child support money. "I shouldn't have to rely on her."

The problems with the RushCard started Oct. 12, when a software upgrade in the card's transaction processing system caused many RushCard accounts to show a zero balance or left customers unable to access to their funds. The company says the software glitch was mostly resolved over the weekend, though thousands remain affected.

The company says that even if customers are unable to access their money, it remains safely housed in MetaBank, the custodian bank used by RushCard. MetaBank is insured by the Federal Deposit Insurance Corp.

The money may be there, but that does little good when people can't get it. RushCard customers have flooded the company's customer service lines, its Facebook page and have messaged Simmons on Twitter, pleading for access to their money.

"I was fortunate that I had some money stored away, but that money has dwindled away," said Daniel Sites, a 29-year-old single father of three from Adrian, Pennsylvania.

Sites, who works for a company that makes military-grade glass, wasn't able to open a traditional bank account because of credit problems stemming from a divorce. He got a RushCard in February, partly because the card had been around for so long that he trusted it.

"I saw RushCard as being stable and the best," he said. Now, he says: "I've spent hours upon hours on hold being lied to, hung up on and so on."

Simmons, who started the company and threw his name and brand behind the card, has been active on Twitter and other social media and says he has been talking with customers to help resolve their problems, according to messages posted in his accounts.

"Still personally calling lots of people this morning. Fixing the remaining problems. People have been so nice despite week of hardships," Simmons posted on Twitter on Monday.

In order to keep existing customers, the company has announced what it is calling a "fee holiday." Customers will be able to use their cards without incurring fees, such as monthly maintenance and transaction fees, from Nov. 1 to Feb. 29.

"To those impacted, we can't begin to express both how sorry we are for the hardships that you've experienced and our commitment to making this right," said Rick Savard, CEO and chairman of RushCard, in a statement.

The RushCard is one of dozens of pre-paid debit cards, accounts that customers can fund with paychecks or other income, and then use the money to shop. They are largely aimed at poor and lower-income Americans who do not have access to checking or savings accounts. Simmons launched the RushCard roughly 12 years ago in an effort to expand access to basic financial services, according to the company.

RushCard charged between $5.95 to $10 a month to use the card, depending on what plan a consumer used. It generally did not charge for basic services like adding money to the card or withdrawing from an in-network ATM.

The card was recommended by Consumer Reports in 2014, but the organization that publishes the magazine retracted its recommendation in a statement Tuesday and said: "The company needs to step up fast."

Several celebrities have backed credit or debit cards over the last decade. The Kardashians gave their endorsement to the Kardashian Kard, a pre-paid debit card that drew heavy criticism for its extremely high fees.

Some pre-paid debit cards, celebrity branded or otherwise, carry high fees that traditional bank accounts usually do not. Banking industry experts and consumer advocates warn that customers should never choose a pre-card based solely on a celebrity's endorsement or involvement.

"The terms and fees attached with a pre-paid debit card are the most important things a person should look at," said Mark Hamrick, an analyst at Bankrate.com. "The reason why you want to use a celebrity product should not be 'because it's a celebrity.'"

Gail Hillebrand, associate director of consumer education and engagement at the Consumer Financial Protection Bureau, said customers should stop direct deposits into their card accounts and she recommends calling companies that may have charged late payment fees to ask for a waiver. Customers can submit a formal complaint to the CFPB at www.consumerfinance.gov/complaint/