A dominant provider of financial services to prisons and jails nationwide has been ordered to pay $4 million in consumer redress and a $2 million civil money penalty over allegations it charged people who were departing jail or prison fees to access their own money on prepaid debit cards that they were forced to use, the Consumer Financial Protection Bureau (CFPB) said Tuesday.
The CFPB said the firm – JPay, a Delaware firm headquartered in Miramar, Fla. – required consumers to sign up for a JPay debit card as a condition of receiving government benefits – in particular, “gate money,” which is money provided under state law to help people meet their essential needs as they are released from incarceration.
“JPay siphoned off taxpayer supported benefits intended to help people transitioning out of the corrections system,” said CFPB Director Rohit Chopra. “JPay exploited its captive customer base to charge unfair fees that harmed the newly released and their families.”
The bureau, in its consent order, said that JPay engaged in unfair, deceptive, and abusive acts and practices in violation of the Consumer Financial Protection Act (CFPA); and violated the Electronic Fund Transfer Act (EFTA) and its implementing rule, Regulation E, which prohibit certain companies and government benefits entities from conditioning the receipt of a government benefit on opening an account with a particular financial.
Specifically, the CFPB said it found that JPay:
- Abused its market dominance: The bureau said that JPay charged consumers unavoidable fees for prepaid cards used to return money owed to consumers at the time of their release from incarceration. They had no choice of how they would receive their money, and JPay did not provide a reasonable way for consumers to close their card accounts to obtain their card balances without paying fees. “By assessing fees on these captive consumers, JPay took advantage of them and caused harm,” it said.
- Illegally required consumers in certain states to receive protected government benefits on debit release cards: The bureau noted that in California, Colorado, and Georgia, just-released individuals were required to establish an account with a financial institution as a condition of receiving their gate money. “JPay violated EFTA and Regulation E by illegally requiring consumers just released from incarceration to establish accounts with a particular financial institution to receive their gate money,” it said.
- Charged fees without authorization: Contrary to the terms stated in certain cardholder agreements, consumers were charged fees before the debit release cards were loaded with additional funds.
- Misrepresented fees to consumers: In certain states, the fees disclosed in the cardholder agreement were different from fees described on a separate “green sheet” (a disclosure, usually on green paper) or were misleadingly omitted from the “green sheet.” Between approximately 2014 and 2017, up to 176,000 consumers received green cards that were inaccurate, incomplete, or both.
In addition to paying $6 million in redress and fines, JPay is ordered to stop charging any fees on release cards except for an inactivity fee after 90 days of inactivity, the bureau said.
The CFPB said JPay is owned by the private equity firm Platinum Equity Partners and that, since 2011, has provided approximately 1.2 million debit release cards to consumers. It said the company leveraged its relationships with state and local departments of correction to impose fees on consumers exiting the prison or jail system. JPay’s fee-bearing debit release card replaced cash or check options previously offered by state departments of correction.