May 19, 2011 / 7:52 PM / 8 years ago

UPDATE 2-Florida AG says investigating 5 prepaid debit card cos

* Subpoenas also issued for possible hidden fees on prepaid debit cards

* Cos issues subpoenas must provide requested information by June 20

* NetSpend, Green Dot shares close in the red (Adds details in para 4, 5, background in para 6-7, 9-12; analyst comment in para 8)

By Brenton Cordeiro

May 19 (Reuters) - The Florida Attorney General’s office said it was investigating prepaid debit card companies — First Data Corp, Green Dot Corp , Account Now Inc, NetSpend Corp and Unirush Financial Services LLC — for possible deceptive and unfair practices.

The Attorney General’s Economic Crimes Division also issued a series of subpoenas regarding possible hidden fees on prepaid debit cards.

“Failing to disclose fees is essentially stealing money from consumers,” Attorney General Pam Bondi said in a statement.

The companies that were issued subpoenas must provide the requested information by June 20, a spokesperson for the Florida Attorney General’s Office told Reuters by e-mail.

The subpoenas addressed to Unirush and AccountNow also include a request for documents related to claims that the companies’ products can increase a consumer’s credit score, the spokesperson said.

The prepaid card industry, which is set to surge in the coming years, has also come under scrutiny lately.

Mercator Advisory Group has forecast that funds loaded on prepaid cards will grow to $118.5 billion in 2012 from $36.6 billion in 2010. MasterCard recently forecast that prepaid volumes would reach more than $840 billion by 2017.

“We believe the issue within the prepaid industry is lack of standards,” Janney Capital’s Thomas McCrohan said.

Last year, a group of Senate Democrats introduced legislation that would limit the types of fees that could be charged on prepaid cards. [ID:nN17129361]

Among other things, it would require more disclosure about fees being charged.

In November, a Minnesota lender halted sales of a prepaid debit card featuring an image of the Kardashian sisters, after Connecticut Attorney General Richard Blumenthal said the card carried “outrageous” fees that unfairly targeted financially unsophisticated young adults. [ID:nN29238713]

Prepaid debit cards work much like traditional, bank-issued debit cards, except they are not associated with a bank account, and usually cater to low-income unbanked or underbanked consumers.

Green Dot’s shares closed down 5 percent at $38.56 on Thursday, while NetSpend’s stock ended lower by 10 percent at $8.55. (Reporting by Brenton Cordeiro in Bangalore; Editing by Prem Udayabhanu)

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