The Root Interview: Russell Simmons on His RushCard
A recent trip he made to Capitol Hill to lobby against bank-to-bank fee caps for prepaid debit cards bore fruit. That set media tongues to wagging, and now Simmons is fighting back.
Russell Simmons is seeing red.
Caught up in the debate over the financial services reform bill now awaiting a Senate vote, the hip-hop-mogul-turned-banking-executive is on the defensive over media reports that he lobbied lawmakers for a sweet deal that would exempt his prepaid debit Visa RushCard from a cap on certain fees.
His frustrations began this spring after Sen. Richard Durbin of Illinois introduced an amendment to the bill that would cap the fees retailers pay banks to process debit-card payments and enabled the Federal Reserve to set fee rates, instead of banks. In Simmons' view, such a cap could force debit-card issuers like his Unirush, LLC to make up for lost revenue by boosting how much they charge customers, thereby hurting low-income consumers.
Simmons railed against the amendment in his blog and on Twitter, and even traveled to Capitol Hill to express his opinion to lawmakers. "I can't believe financial reform has come down to this: big retailers in a money grab on the backs of the poor and underserved," he complained in an open letter to lawmakers.
In the end, the Durbin amendment was modified with an exemption for prepaid debit cards and government issued cards for assistance programs. Reports by Bloomberg Businessweek and The Washington Post (which is owned by the parent company of The Root, The Washington Post Co.) characterized the exemption as a coup for Simmons, noting his efforts to lobby black lawmakers beforehand. Both outlets also cited complaints that the fees charged to RushCard users may put them further into debt.
He called those assertions "a gross misrepresentation of the facts," and demanded retractions from both outlets (a demand as of yet unmet). "From the beginning, I didn't go to protect myself. I was already exempt from this discussion," Simmons told The Root in a recent interview. He said his company was already exempt from the Durbin amendment before he even went to Capitol Hill because it always applied only to banks with over $10 billion in assets (The bank unit issuing the RushCard, Bancorp Bank, has $2 billion in assets). He also said both reports inaccurately described the monthly plan, making the RushCard appear to be more costly than it really is.
But he didn't stop there in his interview with The Root. Calling his consumer advocacy critics "frauds," he even went on to question their ties to Sen. Durbin. Read on for more of what Simmons -- and Ram Palaniappan, general manager of UniRush LLC -- had to say. (And if you're up for it, check their explanation of the RushCard's fees against what's posted on the RushCard site and judge for yourself as to whether they got a raw deal from the Post and Businessweek.)
The Root: You've asked for retractions from Businessweek and The Washington Post; what did they say about the RushCard that was untrue?
Simmons: They effectively doubled the cost of the card usage. The idea of the card was to save people money. We've done lot to bring our fees down by technology and mobile and other resources that we've found. We give away free [ATM withdrawals] and we are not just a debit card, but a whole financial service company. [They didn't say that] we have budgeting tools, that we rebuild credit, that we give away free prescription drug discount cards, that we are looking for new tools for underserved communities at all times....