Like many customers of Green Dot Bank, Texas resident Sheldon Ransom first encountered the online banking company through TurboTax, in the form of a stimulus check.
Though perhaps not a household name, Green Dot, headquartered in Austin, Texas, with a Utah-based bank regulated by the Federal Reserve, has been used by millions of Americans like Ransom, who said he was “never a big banking person” and used to carry cash but suddenly found an easy way to receive basic banking services through the company.
Green Dot, which also operates under the moniker Go2bank, specializes in prepaid debit cards and digital accounts that can be set up for direct-deposit paychecks and to pay bills online. The company has touted itself and its app as the “ultimate mobile bank of Americans living paycheck to paycheck.” Since 1999, the company says it has served more than 33 million customers — a figure that is a function of its 17-year relationship with Walmart and TurboTax, which partners with the bank to help customers claim their tax refunds.
On Aug. 10, Ransom, who works for an ambulance service, tried to use his card to pay tithes to his church but was declined. He then tried to use the card for another payment and was declined again. He called Green Dot customer service and said he was told there was a maintenance issue that would need to be resolved.
By Aug. 14, the issue still hadn’t been fixed. “By the grace of God,” Ransom said, a fellow church member offered to help pay for school clothes for Ransom’s three children.
“It’s really put a damper on our day to day lives,” Ransom said while still locked out of his account.
It was ultimately not until Aug. 19, Ransom said, that he could regain access to his account.
Other Green Dot customers said their funds had been recently waylaid by the bank for one reason or another. The complaints have increased to such an extent that the Better Business Bureau said in a statement that it was looking into “a pattern and influx of complaints against Green Dot,’ which it was reviewing and which required the agency to update Green Dot’s listing on its website.
In addition to Ransom, NBC News spoke with six other customers who said they’d had problems gaining access to their accounts or retrieving their money. Five said they were told by Green Dot customer service representatives that a maintenance or technical issue was making their accounts unavailable. Two others were informed that suspicious or fraudulent activity had been detected and that the bank would have to freeze their accounts. One customer remains frozen out of her account; the status of another is unclear.
Since reaching out to these customers over the past two weeks, all but one in the group who were told their issue stemmed from a maintenance problem said they had regained access to their accounts.
Whatever the reason, the effect has been the same: Customers said that during the time they were frozen out of their accounts, they could not make necessary purchases and pay bills.
Inaccessible funds and mixed messages
NBC News first reported on the issues customers were facing on Aug. 11. The day before, on Aug. 10, a message on Green Dot’s homepage stated the bank was experiencing high call volumes because of “an issue with one of our processing partners,” adding that “some functionality, including balances and transactions, may have been impacted.”
After an inquiry from NBC News, Green Dot spokesperson Alison Lubert said in an email that there had been no system or platform outage; the message on the website was subsequently updated and no longer mentioned a functionality issue. Instead, Lubert said, the bank was in the process of upgrading its platforms. Doing so, she said, required “temporary service interruptions for small segments of customers and can lead to increased call volumes and hold times.”
On Aug. 23, Lubert reiterated in an emailed statement that recent tech conversions at Green Dot caused temporary outages for “very small segments of customers,” but that these have been resolved, and that customers whom the bank confirmed had been affected were issued courtesy credits. The initial message regarding a problem with a processing partner was outdated, she said.
As for the cases that cited suspicious activity, Lubert said that, generally, fraud was increasingly prevalent across the financial services industry. She said Green Dot “invests heavily to identify, mitigate and prevent fraud,” and that it partners with government agencies, including the Secret Service and industry peers to combat and prevent fraud across the board.
Lubert said she could not comment on individual cases.
Walmart did not respond to a request for comment. A spokesperson for TurboTax parent Intuit said in an emailed statement that the company works closely with customers, banking partners and the IRS to help resolve issues quickly.
Kevin Myhre, 60, who lives in Idaho, was among those who received a courtesy credit for having been locked out of his account, of $25.
That money was deposited on Aug. 15. But his account wasn’t reopened until Aug. 21, according to emails viewed by NBC News.
Yet at the time he received his credit he couldn’t use it because his account was still frozen, he said.
Myhre said he signed up with Green Dot after learning about it at Walmart sometime in the past year or two. Having recently been unemployed, Myhre now needed a bank to receive his direct deposit paycheck after taking a job as a video-game tester.
On Aug. 9, Myhre said he tried to use his Green Dot debit card at a Burger King, but it was declined. At first, he didn’t think much of it; he knew he had sufficient funds in his account. When he called the bank the next day, he was told there was a “glitch” or “maintenance issue” as they were putting in “some kind of new system,” and that it was the bank’s “top priority” to address it.
The following day, Myhre said, he went to try the card, but it kept getting declined, at both brick and mortar and online stores. Myhre said he called back and kept receiving the same response about the maintenance issue.
For more than two weeks, the problem persisted, causing Myhre to fall behind on his phone bill, he said. Myhre also pays for the internet access at his parents’ house, and he feared that too could be affected. He had set up the Green Dot account to accept his direct deposits, and as his only bank account, it was the primary mechanism he used to pay bills online.
“I’ve got things shutting down on me because I can’t pay my bills,” Myhre said before the problems were resolved. “I don’t carry cash. I use my card everywhere.”
Myhre said his account was finally unfrozen Aug. 21 — but he remains in the dark about what exactly happened.
“Needless to say, I’m pulling out my funds as fast as possible,” Myhre said.
Green Dot is known for its partnership with TurboTax, furnishing its Turbo Visa Debit Card that customers can use to collect their tax refunds.
That’s how Alabama resident Malisha Robbins, 42, became a Green Dot customer some eight or nine years ago. But for more than a month, Robbins said, she was locked out of her account.
On July 7, she said, she went into a dollar store to make a purchase that was declined. She subsequently called Green Dot customer service, but it wouldn’t give her any information beyond the fact that there was suspicious activity on her account, she said. She was told to mail in a copy of her driver’s license — an extra headache, because she had to wait for Alabama to send her a new license in the mail after she’d lost her previous one — only to be repeatedly told that her situation was still being reviewed.
As of Aug. 24, Robbins said her situation was still unresolved. Green Dot was her only bank account.
Robbins said she and her husband, Brian, who have four children, have now fallen behind on “everything,” including their electricity bill and car payments, and have been forced to borrow money from family members to pay for their children’s school clothes and supplies, she said.
“We’ve been scraping by, just managing to keep our head above water,” she said. “It’s been a nightmare.”
‘Most trustworthy’
On its website, Green Dot Bank notes it was named one of Newsweek’s most trustworthy companies in America for 2023.
But Green Dot has been involved in at least two class-action settlements in the past decade related to consumer harm, including a $3.3 million settlement in 2022 over claims it had spammed consumers with unsolicited text messages about its products.
A 2017 class-action suit stands out as evocative of the current troubles some customers say they are having. According to the suit, Green Dot’s conversion to its processing company, Mastercard, prevented customers “from accessing their protected assets to purchase items as basic as food, clothing and shelter.” A Mastercard spokesperson referred an inquiry about Green Dot’s relationship with Mastercard back to Green Dot. Green Dot’s Lubert confirmed that as part of its technical conversion, it is now moving away from Mastercard.
“During the time the system was down, [Green Dot] account holders did not have access to their funds, causing immense hardship, including the inability to pay for basic necessities such as food, rent, electricity and gas,” the 2017 complaint alleged.
“Additionally, customers were unable to pay their household bills,” which resulted in late fees being assessed.
The case settled for $6.4 million.
The incident also drew the attention of the Senate Banking Committee, whose members demanded to know how widespread the issue was while calling for greater regulatory scrutiny of the prepaid card industry.
Green Dot’s debit cards have been a target for criminal activity. In 2014, the Regional Organized Crime Information Center, a law enforcement group, produced a report on the phenomenon. Similar warnings have been published by the New York Police Department in both 2014 and 2022.
In 2022, Green Dot’s prepaid debit cards were used in a scheme to defraud the Small Business Administration of $286 million worth of loans, the Justice Department said.
More recently, in 2022, Sens. Elizabeth Warren, D-Mass., and Jeanne Shaheen, D-N.H., called for an investigation into Green Dot’s relationship with TurboTax over delays in issuing taxpayer refunds.
In response to the previous class action settlements and other official inquiries around the alleged mishandling of Green Dot’s financial products, Lubert said, “These are legacy issues that have been settled and resolved.
“Under our new CEO and management team, and supported by a new modern platform that is near completion, we are focused on being responsible stewards of our customers’ resources and providing products and services that will help them build stronger financial foundations,” Lubert said.
A spokesperson for the Federal Reserve, which regulates Green Dot, said in a statement that it is aware of the latest set of complaints as part of its standard supervisory process. Both the Federal Reserve and the Consumer Financial Protection Bureau, which helps regulate prepaid cards like Green Dot’s, said they could neither confirm nor deny the existence of an active investigation into the company — a customary response for government agencies.
In a statement, the Utah Department of Financial Institutions said it does not comment on operating institutions. A spokesperson for the Texas Department of Banking said it does not regulate Green Dot Bank.
Chuck Bell, financial policy advocate for Consumer Reports, called the ongoing reports of outages troubling, especially given the lack of bank branches a Green Dot customer can turn to in order to physically withdraw their money.
“It’s really a super big problem to have a glitch that goes on for more than a couple hours at most,” Bell said. “It’s a highly serious situation, and regulators should fine and cite them for the inconvenience to customers. It’s really not acceptable in banking to have this protracted outage.”
This post appeared first on NBC NEWS
