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Photo courtesy of Big Dubya at Flickr
We keep getting warned that it’s dangerous to give out too much personal information on the Internet. In this instance — semi-legitimate financial companies, supported by annoying pop-up ads and Internet advertising — have been caught deducting a $159.95 (hidden fee) out of people’s checking accounts that were unfortunate enough to apply for their product.
Fortunately, the FTC has stepped in and shut down the prepaid debit card operations of these so-called legitimate financial services operators.
According to a complaint filed by the FTC, the defendants market bank-issued, Visa- and MasterCard-branded stored-value (prepaid) cards under a variety of names through Web sites and pop-up and e-mail advertisements that direct consumers to Web sites for the individual cards. These include Acclaim Visa, Impact Visa, Sterling Visa, VIP Advantage Visa, Vue Visa, Elite Plus MasterCard, Impact MasterCard, Secure Deposit MasterCard, VIP MasterCard, and Vue MasterCard. The defendants also market unrelated short-term loans on Web sites such as http://www.superautosource.com/, http://www.supercashsource.com/, and http://www.fastcashusa.com/.
The complaint alleges that, through their prepaid card programs, the defendants debited, without authorization, a $159.95 “application and processing” fee from consumers’ bank accounts, including from consumers who either had no contact with the defendants or had applied for an unrelated short-term loan. Consumers who visited the defendants’ prepaid card Web sites were instructed to provide personally identifiable information, including their bank account information, to apply for a card. The defendants allegedly also made deceptive claims on their Web sites, such as “No Annual Fees” and “No Security Deposit,” without disclosing clearly and prominently that they would use the consumers’ personal information to debit the $159.95 fee. Consumers usually discovered the unauthorized debits when they reviewed their bank account statements or when banks notified them of penalty fees or overdraft charges due to insufficient funds.
Let’s see a $159.95 upfront fee for a card that you finance yourself. Since it’s obvious that the people bilked out of this fee had a bank account, I’m guessing they could get a lot better deal at the bank they do business with, or just about anywhere else!
While credit cards are technically a different animal, there has been a lot of public outcry for them to stop some of their practices in regards to hidden fees. You can learn more about this at the Consumers Union, here.
I did a post on their campaign to make some of these hidden fees more reasonable for both merchants and consumers:
Congress needs to take a hard look at credit practices
FTC release, here.
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1 user commented in " FTC shuts down prepaid debit card vendors with hidden fees "
Follow-up comment rss or Leave a TrackbackWhile it is true that this one company performed unauthorized debits against consumer accounts, and while it was not proper, probably illegal and just not right, I take issue with the writers statement regarding the consumers supposed ease in which they can obtain a debit card from their bank with seemly little or no cost.
Persons with poor credit AND a checking account are not always “freely given” a debit card just because they have a checking account. I know this because my bank would not “give” me one. They said there was still a certain amount of “risk” associated with the debit card issuance due to my credit situation.
I had to go buy a debit card from one of these companies. I take 100% responsibility for my personal credit issues, but I have to say that I am in the same situation as hundreds of thousands of other credit challenged American’s.
My point is that not all of the companies that sell these debit cards are “bad” or doing anything illegal or immoral. They have a huge market, held captive by the rather biased and often times improperly scored credit reporting agencies. The ones (card issuers or marketers) that do play fair are filling a very important need.
A person cannot rent a car, buy an airline ticket and in most instances cannot make purchases on the internet with a Visa or MasterCard logoed card.
If you want to cry foul, you need to take a hard look at the credit scoring policies of “the big three” credit reporting agencies. Their scoring policies are very biased against the consumer and in favor of the companies that report credit scoring to them. The “way” they let credit issuers report is often times run “un-checked” by the “big three”. In fact, most of the time, they simpily take the word of the reporting company and have absolutely no checks or balances in place to prevent improper reporting. I had a 24 month revolving charge account with a regional appliance company. While I did legitamately get more than 30 days late on three occassions, they reported me ninty days late 37 times. How could I be late 37 times in only 24 months? Who knows, but I cannot get that removed from my credit report unless the merchant takes the first step in authorizing this change.
If that is not enough, take a look at our banks. Supposed honest and fair. “Federally Insured” and truted keeper of our money. If you get $20.00 from a bank ATM and it charges you a $3.00 fee, you just paid better than 15% interest on your own money. Look @ some of the “National” banks. Most of them are in state court defending themselves from the States Attorney General’s for charging “usurious” NSF fees. Sometimes as high as $35.00 (plus tax). What makes it so bad is that they usually run their debits BEFORE they post their credits. This “up’s” their chances of getting your checking account into a lower dollar position before posting credits, thereby increasing their chances of getting you in an NSF position, subject to NSF fees before they pull it back out of the negative when they post the credits (deposits).
You want unscruplious? That is a prime example of it!!!
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