The Florida Attorney General’s Office has named a Russell Simmons company as one of five financial firms selected for investigation into criminal activity. Unirush Financial Services, maker of the RushCard pre-paid debit card, has been subpoenaed along with First Data Corporation, Green Dot Corporation, Account Now, Inc., and Netspend Corporation for making fraudulent claims and charging hidden fees.
The RushCard bills itself as a product that will help people manage banking costs better than others, but its payment structure can make the RushCard more expensive than similar debit cards offered at a flat rate. At $1-2 per ATM transaction, using the RushCard can cost much more than the $16 a year the company represents, according to EUR Web. The financial organization also promises to help improve users’ credit ratings, a point under major dispute.
Possibly misleading its customers into believing that the RushCard builds credit and provides savings are two crimes that should be severely punished, if the Florida Attorney General’s Office is able to make its case. Russell Simmons has responded to these allegations by assuring the public that he welcomes the investigation. Simmons hopes it can incite a wider debate on improving the variety of financial instruments that are offered. In support of his RushCard, Simmons stated:
“As a leader in this industry, I encourage a full understanding of RushCard’s transparent pricing, and valuable services, especially for those who have been turned away or let down by traditional banks. Third party research has shown that for many customers, the best prepaid card services offer significant savings compared to what they would pay in traditional bank checking accounts, with savings of up to 50%, as documented by third party research from the nation’s second largest bank by assets, JP Morgan and Company.
“RushCard is the solution for people who want affordable financial services that they can customize to suit their needs. As I look at the payments landscape, I see the banks as the large record chains and my RushCard is looking a lot more like iTunes. I welcome the public debate because the more educated the consumers are the more successful we become.”
Simmons has been an outspoken advocate for promoting pre-paid debit card usage over other banking methods. He claims that he wants to help the black community by providing options that save time and money. Yet, the argument that the RushCard is cheaper than traditional banking is a stretch. The card does provide convenience in a world that requires a piece of plastic to make transactions, but its fees accrue quickly as you’re charged to spend your own money. Seems like a bad deal. The RushCard might be cheaper than the check cashing places Simmons is trying to steer people away from, but is certainly not the optimal way of managing funds. As a masterful businessman, Simmons must know this.
The RushCard does fill a niche between true financial empowerment and the worst elements of the money management business — which check cashing firms represent. But why give the black community an option that is only two steps above the worst? Russell Simmons recognized an opportunity to create an empowering system for helping the financially undeserved. Instead he has provided another sub-optimal vehicle targeted towards an urban audience that needs financial education to build its confidence.
The RushCard is a mediocre tool that exploits fear-based ignorance. While Unirush Financial Services might not be conducting business in a way that is technically illegal, promoting the RushCard as a means of sound money management reeks of the unethical.