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Ninth Circuit Reverses Suit Over Fees Charged Prepaid Debit Cards Given To Released Prisoners

On March 16, 2020, the Ninth Circuit reversed and remanded a lower court decision dismissing a suit brought by a released prisoner over the fees charged to use the release funds placed on a debit card. The Human Rights Defense Center represented the plaintiff in this case.

Danica Brown was arrested in Portland, Oregon on November 25, 2014, for participating in a public protest. She was carrying $30.97 in cash at the time. She was released about seven hours later, with the charges eventually dropped. Instead of releasing her cash back to her, the Multnomah County Jail gave her a Numi Financial prepaid debit card with a $30.97 balance.

On the Numi website, Brown discovered that to get her funds she could make a transfer to her bank but declined to do so, not wanting to release her bank account information. She also discovered a monthly fee of $5.95 but assumed it would apply only after 30 days. On December 1, 2014, Brown attempted a $15 purchase with the Numi card but was declined for insufficient funds. Earlier that day, Numi had deducted the $5.95 monthly service fee, leaving her short of the $15. Worse, they then deducted another $0.95 for the declined charge. On January 1, 2015, Numi deducted the remaining $0.07 in partial payment of the monthly service fee. In total, Brown paid $6.97 to use the $30.97 returned from her arrest (a 22.5% total fee).

Brown filed a complaint in the United States District Court for the District of Oregon against Numi and its partner, Central National Bank and Trust Company, alleging violations of the (1) Electronic Funds Transfers Act (EFTA); (2) Oregon Unfair Trade Practices Act; (3) Fifth Amendment Takings Clause; and (4) conversion and unjust enrichment under Oregon state law. In the legal wrangling that ensued, Brown filed two amended complaints with leave to file a third denied. Ultimately, the District Court dismissed the EFTA claim for failure to state a claim, denied her leave to reinstate the claim, and granted summary judgment on the takings and state law claims.

On appeal, the Ninth Circuit reviewed the failure to state a claim de novo and held that Section 1693l-1 of the EFTA prohibits charging service fees for general use prepaid cards used within the last 12 months. Rejecting Numi’s claim that these cards are not marketed to the general public and therefore are exempt from the EFTA, the Court found that upon Brown’s release she was a member of the general public, thus invoking the EFTA, and that Numi indirectly marketed the card to her through Multnomah County Jail, which gave her no choice in using the card.

Reviewing for abuse of discretion, the Court found that Brown should have been allowed to reinstate her EFTA claims under sections 1693i and 1693l-1 in her third amended complaint. New information that would have been included in this amended complaint was evidence that Numi displayed “large, color posters” in each facility “extoll[ing] the benefits” of the card as a way for released inmates to access their funds “immediately.” Because this demonstrates marketing, the Court rejected Numi’s assertion that Brown’s new EFTA claim failed as a matter of law and held the lower court abused its discretion when issuing a blanket denial.

Finally, reviewing de novo, the Court rejected Numi’s claim that the cards are the functional equivalent of cash or check and thus there was no per se taking and reversed the summary judgment. The Court held that the cards are not equivalent to cash or checks “because the value of the cards quickly and permanently deteriorates.” The lower court held that associated fees or having to go to a bank to get the cash were de minimis. The Court noted that the ticking clock makes all the difference as the value of Brown’s funds began to deteriorate within five days, while cash in her wallet would not have so deteriorated.

Prison Legal News and the Human Rights Defense Center want to hear from anyone who has been in similar circumstances and received a prepaid debit card upon release and was charged any associated fees.

The Human Rights Defense Center and Public Justice represented Brown on appeal, including Karla Gilbride (argued), Public Justice, P.C., Washington, D.C.

Related legal case

Danica Brown v. Stored Value Cards, Inc.