United States

Consumer Waited on Refund After Routing It to Prepaid Card

Some people waiting on their tax refunds will have to wait a little longer and one way of getting your money could put you at risk for a delay.

Lakeithia Myers works hard as a stylist at a salon in Plano. She finished doing her taxes early, filing last month. She had her refund sent to a prepaid card and she says she's been waiting ever since.

"They told me that there was a hold because of suspicious activity but I had never even used the card before," she said. "I am a single mother of four. I just got a new job and it's a distance away from my home, so I need transportation back and forth from my home, which is what my income tax was for."

The card company, Green Dot, asked Myers to send proof of her identity. She was unable to do that because she doesn't have access to a computer. Plus, she said she doesn't understand why it's needed, since she had just given all her information when she purchased and activated the card.

"I went back and read all the rules and regulations when they identify you upfront and get all the personal information," Myers said. "That's what it said. It didn't say any more."

Myers is not alone with her problem. Tax experts say the problem is ID thieves love prepaid cards, too.

"Once they get that on a debit card, the IRS can't get it back," tax attorney Joel Crouch said. "If they had a check, they could stop payment on the check versus if they got the card and there's no way for them to get it back."

The IRS and pre-paid companies are trying to combat the problem by verifying identities. But that's leaving some pre-paid customers in the middle.

"It's very frustrating to know that you have money," Myers said. "It's yours. It belongs to you. You work for it, but it's tangled up with someone else and I'm unsure if I'm going to get it at all."

Myers asked that her pre-paid card be canceled and her tax refund sent back to the IRS so the agency could cut her a paper check. She also wants the $10 she had on the prepaid card refunded.

We reached out Green Dot. Officials said they could not talk to us about her case but they did send this statement:

"Green Dot Bank works diligently to protect the US Government and innocent tax payers from being victimized by tax fraud and stolen identities. As such, Green Dot regularly monitors all its accounts for unusual activity that indicates potential tax fraud. When such an indicator is triggered, the account is blocked and the account holder is immediately contacted in order to verify the legitimacy of the deposit. The vast majority of affected customers are able to electronically verify their identification and have access to their funds within minutes of their funds being blocked. While Green Dot knows that even one blocked account can be inconvenient and frustrating for the honest citizen, we believe our customers greatly appreciate the fact that Green Dot spends so much time and effort protecting the use of their personal information and protecting their money from would-be fraudsters during tax season."

If you're getting a refund, the easiest way to get your money is by having it direct deposited to bank account. If you don't have one, tax experts say you may want to consider getting a refund by check.

Prepaid cards often have fees associated with them. Know the fine print before you buy. Here is more information about prepaid cards from the Federal Trade Commission. Bankrate maintains a web page that compares prepaid cards.

Contact Us