NetSpend, one of the nation’s largest providers of prepaid debit cards, will pay $53 million to resolve federal regulator’s accusations that it misled users about access to funds deposited to the cards. 

The Federal Trade Commission announced Friday that it had reached a deal [PDF] with NetSpend to settle a Nov. 2016 lawsuit alleging the company deceived customers by marketing its cards as ready-to-use, with guaranteed approval.

According to the complaint, NetSpend — a division of Georgia-based Total System Services (TSYS) — led customers into believing that funds loaded onto cards would be available immediately, when in reality some users say they had to wait weeks or were never able to access their funds.

While most NetSpend users can purchase a card at a retailer and load money into their account, they aren’t actually able to access the money right away.

Instead, like other debit cards, users must first contact the issuer — in this case NetSpend — to provide personal identification information, such as date of birth, Social Security numbers, and even utility bills — before the card is fully activated and the user can gain full access to their funds.

In some cases, customers reported that despite providing NetSpend with the information their cards were not activated, and they were forced to re-send the information multiple times.

The FTC argued that NetSpend’s ready-to-use claims were misleading, particularly since these cards are sold at retail alongside gift cards and other pre-loaded debit cards that don’t require this high level of ID confirmation to use.

Additionally, the company allegedly told customers that when a transaction has been disputed, cardholders would be eligible for a provisional credit until the matter was resolved.

However, the FTC claimed this wasn’t the case.

“NetSpend often is slow to resolve account errors, and fails to provide or significantly delays providing provisional credits for account errors,” the complaint states. “These delays in access to funds are especially harmful to consumers who have made the NetSpend card their primary means of financial management, leaving them without alternative means of accessing funds.”

In resolving the lawsuit, NetSpend neither admits nor denies the FTC’s allegations.

As part of the settlement, NetSpent will provide no less than $53 million to certain customers who purchased NetSpend prepaid cards between Jan. 1, 2010, and Aug. 31, 2016. Of the $53 million, $13 million will be used to refund fees charged to cards prior to Aug. 31.  NetSpend will notify customers covered by the settlement.

Additionally, the company is barred from advertising, marketing, promoting, or selling any prepaid product by misrepresenting key details about the time or conditions to use the card.

TSYS said in a statement Friday that it is pleased to resolve the matter.

“We agreed to settle in order to avoid the significant costs associated with protracted litigation and to get back to the business of serving our customers,” the company states. “We do a great deal to encourage card activation and comply with federal law.”

Want more consumer news? Visit our parent organization, Consumer Reports, for the latest on scams, recalls, and other consumer issues.