CFPB Hits JPay with $6 Million in Fines and Restitution Over Fee-Heavy “Debit Release Cards”
by Chuck Sharman
In an order and settlement agreement released on October 19, 2021, by the federal Consumer Financial Protection Bureau (CFPB), prison financial giant JPay, LLC agreed to pay $6 million in fines and restitution, after its prepaid debit cards were found to have taken unfair advantage of some 1.2 million prisoners who were issued one since 2011.
PLN has reported extensively on the whole debit card racket which takes money from prisoners and arrestees and then returns it to them on fee laden debit cards where the money’s owner must pay exorbitant fees for the privilege of spending their own money. The Human Rights Defense Center (HRDC), who publishes PLN, currently has three class action lawsuits pending against debit card companies, Jpay, Numi and Rapid Financial Solutions. In 2015 HRDC petitioned the CFPB to take action against these debit card companies. Six years later, our call was heeded.
The so-called “debit release cards” were handed out with a prepaid account balance, in lieu of a check, for monies that were owed to those leaving custody of prisons that contracted with the Florida-based private financial services firm. Those monies included cash confiscated when a prisoner entered a lockup, as well as gifts received from relatives and friends, wages paid for prison work and “gate money” given to many prisoners upon release to help them reestablish economic life on the outside.
The amount that JPay was ordered and agreed to pay includes $2 million in fines for five violations of the law, plus another $4 million in restitution to victims.
That group includes nearly half of those who received a JPay pre-paid debit card—some 500,000 people in all—who ended up being forced to pay the company a fee just to access their own money, CFPB noted, adding that in most prisons contracting with the firm, JPay held a monopoly in which its pre-paid debit card provided a prisoner their only option for getting the money they were owed.
That put JPay in violation of the Electronic Fund Transfer Act (EFTA), CFPB ruled. A key provision of EFTA—found at 15 U.S.C.§1693k(2) and its companion Regulation E, 12 C.F.R. §1005.10(e)(2)—forbids any requirement that consumers must “establish a Prepaid Account as a condition of receipt of a government benefit,” CFPB noted.
The firm’s fees were also found to be illegal because it failed to provide recipients in advance with a copy of a cardholder agreement—often called a “green sheet” for the color of the paper on which terms and conditions are usually printed—in further violation of EFTA and Regulation E.
Even in states where the firm was required to offer another way to request the money that would avoid fees, JPay buried the option in fine print and set a short time limit of seven to ten days to exercise it by providing an address where a check could be mailed—in and of itself a difficult task for many people who have been locked up and no longer have an address.
That put JPay in violation of sections 1031(a) and 1036(a)(1)(B) of the Consumer Financial Protection Act (CFPA), 12 U.S.C. §5531(a) and §5536(a)(1)(B), which prohibit consumer financial firms from engaging in such “unfair and abusive acts and practices,” CFPB said. The firm also violated CFPA section 1036(a)(1)(A)—12 U.S.C. §5536(a)(1)(A)—by selling a service that was noncompliant with federal consumer financial law.
The fifth and final violation was of the same CFPA sections, with CFPB finding that JPay also “engaged in deceptive acts and practices by making false or misleading representations about the existence, nature, or amount of fees applicable” to its prepaid cards.
That’s a technical way of saying that JPay bought contracts with prisons to hold a monopoly on returning money owed to prisoners upon release, using a debit card with a pre-paid balance that was quickly eaten up by fees—much more quickly than many prisoners could get their money out, in fact.
The cruelty that this scheme inflicts on a person already in a difficult situation—just released from prison, usually without a job and often without an address—is the reason behind a lawsuit filed against JPay in September 2021 by a former California prisoner, Adam Cain [See: Adam Cain v. JPay Inc. USDC, C. Dist. CA, 2:21-cv-07401-FLA-AGR].
When he left Chuckawalla Valley State Prison, Cain was given the cash in his prison account plus $200 in state-provided “gate money”—$213.50 in all—on a JPay pre-paid debit card. Just months later, the card balance had been reduced to $4.87, thanks entirely to JPay’s fees. Cain had never gotten a dime of his money.
He is represented in that suit by HRDC, California attorney John Burton and the Seattle law firm of Sirianni Youtz. CFPB took pains to note that nothing in its ruling prevents Cain or any other plaintiff from collecting full damages for injuries they can prove were caused by JPay. [See: PLN, October, 2021, page 28].
This victory over a particularly egregious prison profiteering practice comes after six years of advocacy and litigation surrounding these release cards, organized under the banner of HRDC’s Stop Prison Profiteering Campaign, which built on the Prison Phone Justice model of engaging with the Federal Communication Commission’s rulemaking and regulation process.
In March 2015, HRDC coordinated 69 additional organizations to sign on to a comment it had drafted and filed with CFPB during a public input process on changes to regulations over electronic transfers of funds, urging it to ban the compulsory use of prepaid debit cards to return money that prisoners are owed when released. The organization also mobilized prisoners nationwide to submit comments on the topic. When JPay attempted to deny the nature of its contracts, HRDC was prepared with irrefutable examples provided by prisoners and public records requests filed to the docket for CFPB to review.
In Michigan, HRDC noted by way of example, JPay’s debit release card carried a long list of fees, including 50 cents to check its balance, 70 cents for each purchase made and $2 for each cash withdrawal taken. Even if the cardholder does nothing, they are charged a 50-cent maintenance fee every month and another fee of $2.99 after 60 days of inactivity. Should they try to cancel the card, though, they’ll get hit with another fee of $9.95.
CFPB Director Rohit Chopra said that JPay’s fees were found illegal because “people could not obtain their money through other means” just as they could not “shop among prepaid card providers” or even “readily cash out the cards without paying a fee.” In a separate tweet, Chopra expanded on that idea, saying that JPay “exploited its captive customer base, harming the newly released and their families.”
For its part, JPay said it was “pleased” with the CFPB settlement, according to spokeswoman Jade Trombetta.
Founded in 2002 to bilk prisoners and their families by taking over money transfer services, JPay was acquired in 2015 by Securus Technologies, which was itself acquired in 2017 by Beverly Hills-based Platinum Equity Partners and rebranded Aventiv Technologies. Platinum Equity said that the settlement “is in keeping with” its emphasis on “collaboration with regulators and correction of certain past practices,” according to one of the firm’s partners, Mark Barnhill.
As a private firm, JPay does not have to release its financial results. In 2013, before it was acquired by Securus, the firm reported revenue of more than $500 million. See: U.S. Consumer Financial Protection Bureau Administrative Proceeding Consent Order, in the matter of JPay, LLC, File No. 2021-CFPB-0006.
The settlement is posted on both the PLN and the CFPB websites.
Sources: New York Times, Washington Post, Reuters, StopPrisonProfiteering.org
Related legal cases
Adam Cain v. JPay Inc.
|USDC, C. Dist. CA, 2:21-cv-07401-FLA-AGR
U.S. Consumer Financial Protection Bureau Administrative Proceeding Consent Order, in the matter of JPay, LLC
|File No. 2021-CFPB-0006