It's amazing who the interchange debate will bring out of the woodwork. Hip-hop entrepreneur Russell Simmons has been making the rounds on Capitol Hill (and on Huffington Post) urging Congress not to act on interchange reform. Why is Simmons so engaged with this issue?
The answer is because he makes a lot of money off of interchange from a very questionable product. Simmons markets the "RushCard" a Visa-branded prepaid debit product marketed primarily to the black community. The card provides a payment device for an ersatz deposit account, which allows cardholders to make transactions when cash is not accepted. Remember that there is no extension of credit to the consumer on the RushCard. Instead, like any prepaid debit product, the RushCard consumer is actually lending money to Bancorp Bank, the card issuer. And, as we'll see, the consumer is actually paying money to make an interest-free loan to the Bancorp Bank.
Simmon's claim is that the RushCard provides important access to financial services for the unbanked: it's helps consumers avoid check cashing and bank account fees, has greater security than cash, is convenient, and it's "the prepaid card that provides respect."
What's respect worth? Well, take a look at the fee schedule below and decide for yourself.