Less than a week after having a new Director sworn in, the Consumer Financial Protection Bureau announced its first enforcement action of the Rohit Chopra era, assessing $6 million in fines and penalties against a company that offers financial services products to individuals incarcerated and recently released from prisons and jails nationwide.
JPay will pay $4 million in restitution to its customers and a civil fine of $2 million under the consent order, a copy of which can be accessed by clicking here.
Chopra issued a lengthy statement alongside the announcement of the enforcement action, saying, “this case illustrates some of the market failures and harms that occur when the disbursement of government benefits is outsourced to third-party financial services companies that fail to adhere to the law.”
Among the violations uncovered by the CFPB were that the company charged consumers unavoidable fees when issuing them debit cards upon their release from prison or jail. The cards contain funds that were seized with the individuals were incarcerated, earnings from prison labor, or state benefits awarded to recently released inmates to help them get back on their feet. Consumers were forced to use the debit cards and did not have any other alternative to access their funds without paying fees, which the CFPB said was an unfair, deceptive, and abusive act in violation of the Consumer Financial Protection Act. JPay was also accused of violating the Electronic Funds Transfer Act when requiring individuals to sign up for accounts from a specific institution in order to receive their funds. The company also charged fees without authorization and misrepresented the fees that were being charged.
“JPay cooperated fully with the CFPB in this matter, guided by our organization’s transformation agenda that emphasizes working collaboratively with regulators, reforming certain past business practices, and making products and services more affordable and accessible,” a company spokesman said in a statement, according to a published report.
JPay is owned by Platinum Equity Partners, a private equity company. It turned a profit on $500 million of revenue in 2013, according to the report.
Along with paying the $6 million, the company must also stop charging most of the fees it assesses, except for an inactivity fee if a card is not used for 90 days.
