/>iOn November 14, the CFPB entered into a consent order with a telecommunications company and its subsidiaries (collectively, the “company”) for allegedly withdrawing millions of dollars from over half a million consumer accounts and preventing money transfers to incarcerated individuals, depriving them of essential goods like food, medicine, and clothing, in violation of the CFPA’s prohibitions on unfair acts or practices.
The company partners with correctional facilities across the United States to offer a range of products and services, including money transfer services for incarcerated individuals and their families and friends. These services allow friends and family to deposit money into an incarcerated person’s account, which can then be used for purchases at the correctional facility’s commissary.
The company frequently operates as the exclusive provider of money transfer services in the facilities it serves. According to the CFPB, the company enforces a “no-refund” policy for money transfers, with limited exceptions, making it challenging for consumers to resolve issues such as duplicate transactions or funds sent to incorrect accounts. As a result, some consumers filed chargebacks with their financial institutions to recover lost funds, sometimes, at the suggestion of the company’s customer service representatives. The company’s policy for chargebacks, however, was to block the incarcerated consumer’s account from receiving further credit or debit card transfers until the chargeback amount was repaid. In addition, consumers were also required to pay an additional fee.
Specifically, the CFPB found that the company violated the CFPA’s prohibition on unfair acts and practices by engaging in the following conduct:
- Blocking Accounts and Money Transfers. The company unfairly froze accounts of incarcerated consumers after chargebacks were filed, even though the consumers had no control over the chargebacks. Friends and family were also blocked from sending funds via credit or debit card until the chargeback amount and, in some cases, an additional $25 fee were repaid.
- Unlawfully Seizing Funds from Inactive Accounts. From 2019 to 2023, the company took balances from about 575,000 “unified accounts”—which are used for services like calls and video visits—after 90-180 days of inactivity, without adequately disclosing the inactivity policy or notifying account holders their funds would be seized.
- Concealing Fees from Consumers. The company failed to provide clear fee schedules for money transfers, leaving consumers unaware of how much they would pay for deposits depending on what payment channel they elected to use.
The CFPB’s order requires the company to return at least $2 million to consumers, including refunds of fees and chargeback balances paid by friends and family to unblock accounts, even if they did not initiate the chargebacks, and refunds of funds unlawfully taken from inactive unified accounts. The company must also pay a $1 million penalty to the CFPB’s victims relief fund. The order further prohibits the company from blocking accounts due to chargebacks, seizing funds in inactive unified accounts, and failing to disclose money transfer fee schedules to consumers.
Putting It Into Practice: This enforcement underscores regulators’ commitment to addressing improper payment provider practices (see here and here for our discussions on similar recent enforcements). Companies providing payment services to consumers should review these enforcements with an eye towards bringing their business practices in line with regulators’ standards.
