Kardashians Back Out of High-Fee Debit Card Deal
Nov 30th 2010 12:45AM
Updated Nov 30th 2010 1:14AM
The Kardashian sisters are seeking to cut ties with a venture that sold prepaid debit cards under their name after coming under attack for the card's high fees.
The card, which launched three weeks ago, was aimed at young adults, the same group that watches the sisters' hit cable TV show "Keeping Up With the Kardashians."
An attorney for the sisters sent a letter Monday to parties affiliated with the card asking them to immediately stop using the names and images of the three sisters.
The notice came after Connecticut Attorney General Richard Blumenthal warned on Friday that he would investigate the program to see if it violated state laws to protect consumers. He called the card's fees "predatory."
Launched with Fanfare
The Kardashians - Kim, Khloe and Kourtney - launched the card on Nov. 10, with much fanfare. The "Kardashian Kard" includes a picture of the trio on one side, and the sisters said at the time of the launch they were "excited ... to create their very own financial product."
But almost immediately the Kardashians came under attack by consumer advocates for attaching their names to a card with fees that far surpassed other prepaid debit cards on the market.
"The Kardashians have worked extremely long and hard to create a positive public persona that appeals to everyone, particularly young adults," says the letter from Dennis Roach, legal counsel of Dash Dolls, which represents the three sisters. "Unfortunately, the negative spotlight turned on the Kardashians."
Just to buy the card and use it costs $59.95 for six months, or $99.95 for 12 months. That does not include any money on the card. The person buying the card must add money onto it.
The initial feels were just the start. After those six or 12 months are up, it costs $7.95 a month to keep using the card. Users have to pay $1.50 to withdraw cash from an ATM, and $1 to check their balance. Talking to a customer representative on the phone costs $1.50 for each call, and canceling the card costs $6.
Losing the card results in a charge of $9.95. If the loss is reported within two days, then losses are limited to $50. But if the loss or theft is not reported, and the issuer believes the user knew it was lost or stolen, then losses could be as high as $500, according to the terms and conditions on the Kardashian Kard website.
Taking Advantage of Young Adults?
Those fees caught the attention of Blumenthal, who said on Friday that he was investigating the card because of the fees and its appeal to financially unsophisticated young adults.
"Keeping up with the Kardashians is impossible with this card, where consumers lose money before they use money. Even before consumers spend a dime, the Kardashian Kard fees swallow the card's value," Blumenthal said in a statement Monday after news that the Kardashians were cutting ties to the card.
In a statement late Monday, card-issuer University National Bank confirmed that it had ended the sale of the Kardashian cards. Consumers who bought the card will get their money back, including fees that they might have incurred, it said.
MasterCard (MA), which was a partner in the card, said in a statement that "the decision to end the program affirms that consumers did not find value in this particular prepaid offering."
Representatives from Mobe and Mobile Resources Card, also affiliated with the card, did not return requests for comment.
Consumers Union, the publisher of Consumer Reports, had come out strongly in recent weeks against the Kardashians for using their celebrity status to hawk a prepaid card loaded with fees.
"Any other celebrity or business that is thinking of associating its name with a prepaid card should take a close look at the fees and protections, and say 'no thanks' unless the fees are low and the missing consumer protections are added," Gail Hillebrand, director of Consumers Union's Defend Your Dollars campaign, said after hearing Monday's news.
Consumer Union is calling on the newly authorized federal Consumer Financial Protection Bureau to make reining in abusive prepaid card practices a top priority.