RushCard Lawsuit Puts Extra Focus on Arbitration

Oct. 26, 2015, 2:43 PM

By Chris Bruce, Bloomberg BNA

RushCard, the prepaid payment service founded by entertainment mogul Russell Simmons, is facing more complaints about access to account funds, this time in a lawsuit that adds extra focus to a proposed regulatory plan to limit arbitration clauses.

Stephanie Fuentes and others filed a federal class-action suit on Oct. 23 in Manhattan, alleging a laundry list of claims after being unable to access funds in their RushCard accounts. The company already is facing questions from the Consumer Financial Protection Bureau. CFPB Director Richard Cordray Oct. 23 said his agency is taking “direct action to get to the bottom of this situation,” citing the possibility of harm to consumers.

The 27-page complaint highlights efforts by the fast-developing alternative payments industry to comply with well-entrenched consumer protection expectations. The case also will put new focus on a CFPB proposal to prohibit arbitration clauses that ban class suits. RushCard uses such a provision, which the plaintiffs said should not apply.

“The terms of RushCard’s arbitration provision, waiver of class action rights and right to trial by jury are unconscionable and Plaintiffs and Class Members would not have agreed to those terms or deposited any money with RushCard had they known about the fraudulent, unlawful and unfair activity and misrepresentations as described in this Complaint,” the suit said.

The suit is Fuentes v. UniRush LLC, S.D.N.Y., No. 15-cv-08372, filed Oct. 23, 2015.

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