Prepaid Financial Services (PFS) has been fined £916,746 (€1.1m) by the Payment Systems Regulator in the UK following an investigation into cartel behaviour in prepaid cards issued to vulnerable people on welfare benefits.
The regulator found that five parties had broken competition law and imposed fines on them. Mastercard received the largest fine of £31.5m (€37.7m). The four other companies involved – PFS, Advanced Payment Solutions, Sulion and Allpay – received varying fines of less than £1m.
The cards were used by local authorities to distribute welfare payments to vulnerable members of society, such as homeless people, victims of domestic violence and asylum seekers.
The Payment Systems Regulator (PSR) said the firms broke competition law by agreeing not to compete or poach each other’s customers on pre-paid cards offered by local authorities to distribute welfare payments to vulnerable people.
During the course of the investigation, all parties settled and admitted breaking the law, the regulator said in a statement.
PSR managing director Chris Hemsley said the case was “particularly serious because the illegal cartel behaviour meant there was less competition and choice for local authorities”.
“This means they may have missed out on cheaper or better-quality products which were used by some of the most vulnerable in society.”
The investigation, and the “significant fines” imposed “send a clear message that the PSR has zero tolerance for cartel behaviour,” Mr Hemsley said.
This decision concludes the regulator’s investigation that was opened in 2017 following a complaint made by Allpay about one of the infringements. The Payments Systems Regulator announced its provisional findings in March last year.
The acquisition of Noel and Valerie Moran’s PFS by Australian payments company EML was first announced in November 2019 in a headline grabbing deal. In a statement last March, EML said it had received guarantees from the owners prior to the sale of the company to cover any potential fines that could be imposed following the investigation by the Payment Systems Regulator in the UK.
In Ireland, Prepaid Card Services, part of the former PFS, remains the subject of a probe by the Central Bank. EML has previously said Central Bank concerns originally flagged last May relate to the Irish subsidiary Prepaid Financial Services’ anti-money laundering/counter-terrorism financing, risk and control frameworks and governance.
