RushCard, the pre-paid debit card backed by hip-hop mogul Russell Simmons, will create a "multi-million dollar" fund to help cover the costs that its customers suffered while the card was beset by technical problems earlier this month.
RushCard customers who can show they incurred late fees, lost a deposit on an apartment, or any such financial setback as a direct result of the RushCard 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," said Russell Simmons in an exclusive interview with The Associated Press.
Technical problems tied to RushCard moving to a new payment processor, a division of MasterCard, caused hundreds of thousands of RushCard customers to lose access to their money for as many as 10 days earlier this month. Many RushCard customers are low-income minority Americans who don't have traditional bank accounts. Without access to their money stored on their RushCards, some customers said they could not buy food for their families, pay bills, or pay for gas to get to their jobs.
The debacle swept through social media. Simmons' Twitter and Instagram accounts became places for RushCard customers to explain their plights and plead for access to their money.
Federal regulators, including the Consumer Financial Protection Bureau, said they are now looking into what happened at RushCard. At least one class-action lawsuit has been filed.
RushCard was one of the earliest pre-paid debit cards on the market. These cards, aimed at people who cannot get a bank account, allow customers to deposit paychecks, cash or benefit payments in the account and then shop with the card.
Since Simmons started RushCard roughly 12 years ago, pre-paid debit cards have exploded in popularity and have started replacing traditional methods that people without bank accounts would use to access their money, like check cashing stores.
Consumer Reports in 2014 recommended the RushCard, but rescinded that recommendation last week due to the card's technical problems.
RushCard and Simmons have been consistently apologetic since the troubles began. Simmons has used his Twitter accounts to be in contact with RushCard users and has repeatedly said he is working to make sure the problems are fixed.
He has also said he's been compensating RushCard users out of his own pocket. The fund is designed to formalize what he says he's already been doing. An unannounced third-party will run the fund and RushCard said regulators are being consulted to make sure the fund is properly administered.
RushCard, MasterCard and MetaBank, the custodian bank for the money RushCard users put on the card, will chip into the fund, the company said. The exact size of the fund will be determined by the size of the damages incurred by RushCard users. It is likely to be in the tens of millions of dollars.
"We don't have a number yet because it really is whatever it takes to make good with our customers," Simmons said.