PE-owned prison telecom company illegally drained money from payment accounts for incarcerated people

Federal regulators have ordered private equity-owned prison telecommunications giant ViaPath (formerly Global Tel Link) to pay $3 million for allegedly freezing and draining accounts for people who are incarcerated. 

ViaPath, owned by private equity firm American Securities, is one of the nation’s largest prison telecom corporations, providing telephone services, online messaging, and video visitation for people in correctional facilities. 

In addition, ViaPath subsidiaries Telmate and TouchPay Holdings provide money transfer services to incarcerated people. Family and friends can use these services to deposit money into an incarcerated person’s account, who can then use those funds for food, medicine, clothing, and other products at a prison or jail commissary. 

According to the Consumer Financial Protection Bureau (CFPB), ViaPath, through Telmate and Touchpay, violated federal law in the following ways:

• Blocked consumers’ accounts when a money transfer was charged-back, which prevented friends and family consumers from sending, and incarcerated consumers from receiving, funds via debit card or credit card transfer. In some circumstances ViaPath charged a fee to unblock an account, even if consumers had not filed a chargeback. 
• Hid fees from consumers that would allow them to understand how the payment types or amounts they deposit may impact the fee they are charged for the money transfer transaction.
• Illegally took funds from inactive accounts and did not properly disclose a policy of seizing funds from inactive accounts. Between January 2019 and January 2023, ViaPath upheld this policy and through it unlawfully took funds from approximately 575,000 unified accounts. 

The CFPB enforcement action adds to a string of scandals surrounding ViaPath related to a variety of predatory practices, from charging families exploitative rates as high as $1 per minute as of 2021 to speak to incarcerated loved ones to illegally recording privileged attorney-client calls.

Other federal regulators have also taken note of the need for stronger consumer protection for incarcerated people impacted by ViaPath and its peers; in July, the Federal Communication Commission (FCC) voted to implement new rate caps that will drastically reduce the cost of phone calls in prisons and jails. ViaPath and Securus, another major prison telecom provider owned by private equity firm Platinum Equity, dominated an estimated 74 to 83 percent of the market as of 2019. The new FCC rules are expected to significantly curb the companies’ ability to charge “exorbitant” prices for phone calls between incarcerated people and their loved ones.

As regulatory scrutiny of ViaPath has ramped up, so too have headwinds for the broader prison services market that is dominated by private equity. 

TKC Holdings, owned by private equity firm HIG Capital, is one of the largest suppliers of food and commissary services in prisons and jails. PESP has previously analyzed severe quality failures with TKC-run cafeterias and commissaries, including “inedible food and undrinkable, foul-smelling water” and predatory revenue structures. 

Meanwhile, HIG’s prison healthcare company Wellpath filed for bankruptcy earlier this month. PESP has previously analyzed the stream of allegations and investigations at Wellpath facilities for conditions that have endangered and harmed patients under its care. And Corison/YesCare, the other private equity-owned prison healthcare giant, filed for bankruptcy last year in an attempt to shed millions of dollars in legal and financial liabilities in the process. 

The industry for prison services appears to have hit the skids, and the private equity firms that have been seeking outsized profits from substandard services for incarcerated people now face a reckoning. Investors in the private equity firms driving the industry, including American Securities, Platinum Equity, and HIG Capital, must seriously rethink the ethical harms and fiduciary risk of these investment gambles.