Green Dot-Walmart Customer Backlash Echoes RushCard's Costly Fiasco

Just when Green Dot made it through one firestorm, along comes another.

The nation's leading prepaid card issuer, which spent nearly four months battling a large shareholder that was agitating for a management shake-up, now finds itself in the third week of complaints from customers who have been unable to access their funds.

The consumer furor began just days before a May 23 vote to determine whether Green Dot Chief Executive Steve Streit should keep his seat on the company's board. Streit did win re-election, but he received far fewer votes than two of the candidates put forward by the activist shareholder.

Over the course of the last two weeks, Green Dot has made contradictory statements about the technical problems, which have affected users of a Walmart-branded prepaid card.

On May 18 Green Dot said that the problems were preventing customers from checking their balances online and over the phone, but were not affecting their ability to make purchases or get cash from ATMs. But six days later the company acknowledged on Facebook that some transactions were being erroneously declined.

When asked about that reversal, Green Dot replied Tuesday in an email: "The balance inquiry issue was the only problem we were aware of when the situation first developed. However, once that issue was resolved, it became clear other small segments of customers were experiencing other issues with their cards, including balances that were lower than what they should have been due to various processing-related issues, and other segments were experiencing trouble activating cards that were received in the mail."

Green Dot, of Pasadena, Calif., is in the midst of a transition to a new payment processor, MasterCard Payment Transaction Services, and has attributed the problems to slowdowns at MasterCard.

On Tuesday Green Dot said through a spokesman that "all problems appear to have been resolved." A MasterCard spokesman said Wednesday that systems are operating normally, adding that the company is addressing "any one-off customer issues."

On social media this week, some customers reported that their issues had been resolved, while others continued to lodge complaints as late as Wednesday. The glitches have affected the Walmart MoneyCard, which is issued by Green Dot Bank.

Letitia Brown, a court clerk who lives in Novi, Mich., said in an interview Tuesday that she has been unable to access her most recent paycheck, which was supposed to be deposited directly onto her prepaid card last week. She said that she planned to use that money to put gas in her car.

"I had to borrow money just to get home from work," Brown said. "That's a stupid problem to have."

For Green Dot the problems are the latest twist in a long-running saga over payment processing.

In 2012 the firm announced plans to build an in-house processing solution. But the project was beset by delays and the departure of key personnel. Last year Green Dot announced that MasterCard would be the exclusive card processor for Green Dot Bank.

The recent troubles at Green Dot are reminiscent of last year's fiasco involving the RushCard prepaid card. That situation also involved customers who were unable to access their funds, and it happened as RushCard was transitioning its payment processing to MasterCard.

RushCard, which was founded by the hip-hop impresario Russell Simmons, recently agreed to a $20.5 million settlement to resolve thousands of customer claims in a class action. In all, more than 400,000 RushCard customers were affected, according to the company.

Green Dot declined to say how many of its customers have been hurt by its recent problems. The company has been offering some customers a $50 credit, according to reports on social media.

"While we aren't able to publicly state a specific number of customers who were impacted by a specific problem, we do know that the vast majority of our customers were not impacted by any issue and that only a small percentage of customers were impacted by any problem," Green Dot said in its email.

The Federal Reserve Board, which regulates Green Dot's $919 million-asset bank, did not immediately provide information Tuesday about any consumer complaints it has received.