JPMorgan Chase plans to exit prepaid card business
By David Henry
NEW YORK (Reuters) - JPMorgan Chase & Co (JPM.N: Quote) plans to sell or exit over time its business of issuing prepaid cards for corporate payrolls and government tax refunds and benefits, the company said on Thursday.
The cards, which had been offered with cash and treasury services to companies and governments, had become a headache of risks in operations and regulations, according to a person familiar with the matter who was not authorized to speak publicly.
Last month JPMorgan warned some 465,000 holders of the cards that their personal data may have been accessed by computer hackers who attacked its network in July.
The company mailed incorrect replacement cards to some 4,000 people receiving payments from the state of Connecticut. The state treasurer blasted the bank for its "obvious lack of attention to detail.
Government regulators are focusing on whether corporate payroll programs that use the cards have sufficient safeguards against burdening employees with fees.
In July, New York State Attorney General Eric Schneiderman sent letters to more than 20 companies asking for details on how they use payroll cards. [ID:nL2N0F916H] The probe was started after complaints from workers and advocacy groups about fees bank charge for using the cards.
Employers have said that they offer the cards to employees as an option along with paper paychecks and direct deposits to bank accounts. Even with the fees, they can be cheaper than check-cashing services.
But there have been complaints that direct deposit choices are hard to exercise and a lawsuit was filed against a McDonald's franchisee by an employee who claimed she was required to use a JPMorgan Chase payroll card. Continued...