Netspend Hit with $1M Fine for Illegal Debt Collecting Practices

New York’s Attorney General Letitia James has announced a $1 million fine against financial services company Netspend for violating the Exempt Income Protection Act (EIPA). The law, designed to protect consumers from predatory debt collectors, was flouted by Netspend, who illegally turned over customers’ funds to debt collectors.

‘When banks allow debt collectors to wipe out New Yorkers’ bank accounts, they’re not only throwing vulnerable people into financial chaos, they’re breaking the law,’ James stated. ‘My office’s guide provides valuable tips for New Yorkers to protect their funds and hold banks and debt collectors accountable when they break the law.’

The EIPA automatically protects a certain amount of money in consumers’ bank accounts from being frozen or seized, including vital government benefits like Social Security and veteran’s benefits. Netspend’s illegal actions left many New Yorkers without critical funds for their basic needs.

Attorney General James has been aggressive in securing restitution for New York consumers affected by EIPA violations. In April 2024, Pathward Bank paid over $700,000 for unlawfully freezing customer accounts and transferring money to debt collectors. In February 2024, a debt collection law firm was penalized over $650,000 for filing frivolous lawsuits against tenants.

The OAG’s guide helps New Yorkers understand how to use EIPA to protect their funds and report violations. Consumers who have had their funds seized in violation of the law should contact OAG’s Consumer Frauds Bureau online or by calling 1-800-771-7755.