At some point in the coming weeks, Congress is set to consider a fast-tracked proposal that would nullify a slew of new protections for the millions of Americans who use prepaid debit cards. With the clock ticking down to that vote, a lawsuit is trying to compel the release of any communications about these rules between industry lobbyists, lawmakers, and federal regulators.
The Freedom Of Information Act lawsuit [PDF] filed today by advocacy group Allied Progress asks a federal court in D.C. to compel the Consumer Financial Protection Bureau to immediately turn over emails and other communications involving the pending prepaid card rules.
The group is seeking to obtain all communications from Dec. 1, 2014 until present between prepaid card giant NetSpend, its lobbyists, and its parent company Total System Service (TSYS), as well as from 12 senators involved in a resolution that would erase forthcoming prepaid card rules.
Specifically, the FOIA requests concerns 10 lobbyists, 10 NetSpend and TSYS employees, as well as correspondence sent to email addresses ending in “@tsys.com” and “@netspend.com,” and 17 CFPB staff members, including Director Richard Cordray.
The Rule & Opposition
The three resolutions — which explicitly declare that the Senate or House “disapproves the rule” and that “such rule shall have no force or effect” — each use the Congressional Review Act (CRA), a law that allows lawmakers to undo recently finalized regulations within a limited window of time.
The finalized rule, announced in Oct. 2016, essentially provides users of prepaid cards with the same protections that are currently provided to traditional debit cards, such as, free account balance info; timely dispute resolution; and limited liability on fraudulent transactions.
The new prepaid guidelines have received support from some big names in the prepaid industry, including GreenDot and the Center for Financial Services Innovation, which noted earlier this month that the positives of the rules “outweigh the negatives.”
But not all prepaid companies have backed the rule. For instance TSYS’s NetSpend has been vocal in its displeasure over the rules, admitting that it stands to lose $80 million in overdraft fees if they are implemented.
It should also be noted that NetSpend recently agreed to pay $53 million to resolve Federal Trade Commission allegations that it misled prepaid card customers.
To that end, the company, its executives, and its parent company have contributed to the campaigns of lawmakers opposing the rule.
Looking For Transparency
Allied Progress, which first filed FOIA [PDF] requests with the CFPB on April 12, believes that the communications between NetSpend, lawmakers, TSYS, lobbyists, and federal regulators could prove “vital to any debate over the prepaid card rule repeal which could happen any day.”
After its introduction, the Sen. resolution was referred to the Committee on Banking, Housing, and Urban Affairs, which discharged [PDF] the bill on March 30, one day before reaching that $53 million settlement deal with the FTC.
This discharge means that the Committee didn’t address the bill, but passed it along for the consideration of the full Senate, a review of which could take place next week. However, because the Congressional Review Act provides a short window of time to pass a resolution, it’s believed that lawmakers only have until early May before the resolution can no longer be passed.
Allied Progress’ request included an appeal for expedited processing because of the “urgent public need to understand the decision-making process behind the prepaid rule, and elected representatives’ roles in that process.”
If the correspondence is made public, the group contends it would give consumers access to information they could use to advise their elected officials as they consider the resolutions to revoke the rules.
Despite noting that the release of records in a timely manner was important because of the pending resolutions, the CFPB denied [PDF] the request the same day the FOIA request was submitted.
In a letter to Frisch, the CFPB notes that the expedited process request was denied because the group did not provide proof that expedited treatment “could reasonably be expected to pose an imminent threat to the life or physical safety of an individual, an urgency to inform the public concerning actual or alleged federal government activity, or if made by a person primarily engaged in disseminating information.”
With lawmakers expected to take up the three resolutions to repeal the long-awaited prepaid card rules next week, Allied Progress says the release of the records is of the utmost importance.
With its lawsuit, Allied Progress claims that the CFPB failed to comply with the expedited processing provision and wrongfully denied the request for expedited processing.
Shining A Light
In addition to providing ammunition for constituents to inform their elected officials, Allied Progress believes the communications could shed light on the connection between elected officials, specifically Georgia Sen. David Perdue and his allies, and TSYS.
Perdue introduced S.J. Res.19 on Feb. 1, explicitly declaring that the Senate “disapproves the rule” and that “such rule shall have no force or effect.”
Perdue, who has introduced other legislation to overhaul the CFPB in the past, believes the prepaid rules are overreaching and would hurt consumers by limiting options, the Journal Constitution reports.
Those beliefs have been echoed by companies that provide prepaid cards, such as NetSpend and TSYS, which stand to lose millions if the rules take effect.
For example, in addition to having ties to Perdue via its home-base in Georgia, TSYS has also provided election contributions to the lawmaker.
According to the Center for Responsive Politics, TSYS contributed $2,500 to Perdue during the 2016 election. Back in 2014, TSYS contributed $15,000 to Perdue.
In all, Allied Progress, citing the Center for Responsive Politics, contends that NetSpend, its parent company, and past company executives have contributed more than $33,000 to Perdue since 2014.
So far, the Senate bill has the support of six co-sponsors: Johnny Isakson (GA), Tom Cotton (AK), Ron Johnson (WI), James Lankford (OK), Mike Lee (UT), and Mike Rounds (SD).
According to the Center for Responsive Politics, many of these lawmakers have also received contributions from TSYS. During the 2016 election cycle, the company contributed $7,000 to Isakson, and $5,000 to Johnson.
Additionally, NetSpend — and its overdraft protection program — were part of an apparent grassroots initiative during the rule-making process, where the company was mentioned nearly 700 times.
Despite the apparent connections between NetSpend, TSYS, and lawmakers, a rep for the prepaid card company tells the Journal Constitution that it “supports smart regulation of our industry that promotes financial inclusion and empowerment for Americans, including those without access to traditional financial services.”