RushCard, the prepaid debit card company founded by hip-hop mogul Russell Simmons, is being bought by rival Green Dot for $147 million.
Green Dot said Monday it will buy UniRush, the parent company of RushCard as well as the Rapid! payroll debit card. Simmons started RushCard in 2003 as one of the first prepaid cards to focus on minority customers and charge lower-than-average fees.
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Prepaid debit cards are largely used by the "unbanked," or those who do not have a checking or savings account and largely rely on cash to pay their bills month to month.
RushCard is perhaps best known for a software upgrade that went haywire in 2015, cutting off more than 400,000 customers from their funds for days and even weeks. People told of being unable to purchase necessities for their children, and customer service lines were tied up for weeks.
Simmons apologized and took personal responsibility, and later used some of his personal fortune to cover customers' expenses. "This whole situation has been devastating for them, and we want to make sure they are made whole," Simmons told The Associated Press in 2015.
Green Dot CEO Steve Streit said he and Simmons had on-and-off conversations about an acquisition going back years.
Despite RushCard's 2015 problems, Streit said Green Dot is buying RushCard largely for the name recognition as well as its sizeable customer base of 750,000 people. Green Dot plans to retain the RushCard name and brand along with its other products.
"Having his name associated with RushCard is a big reason why we are buying it," Streit said in an interview.
As part of the transaction, Streit said Green Dot will not be liable for any settlements tied to the 2015 incident. This includes the investigation still ongoing by the Consumer Financial Protection Bureau.
Streit said the Rapid! payroll card also made the company attractive. Rapid! has 2,500 corporate customers who use the card as an option to pay employees who may not have regular bank accounts.