CFPB urged to enact prepaid card protections
November 18, 2011
That Come With Traditional Debit Cards Linked To Bank Accounts
WASHINGTON, D.C. — Consumers groups urged the Consumer Financial Protection Bureau (CFPB) today to require prepaid card issuers to provide consumers with the same kinds of protections they get when using a traditional debit card linked to a bank account.
“As the cost of bank accounts continue to rise, more and more consumers are turning to prepaid cards as an alternative,” said Michelle Jun, senior attorney for Consumers Union, the advocacy arm of Consumer Reports. “But prepaid cards offer weaker protections than bank accounts and can be loaded with hidden fees that make them costly to use. Prepaid card issuers should be required to provide consumers with the same mandatory protections that come with traditional debit cards and to clearly disclose all fees so consumers know these costs up front.”
Many consumers are relying on general purpose, reloadable prepaid cards to manage their finances and make purchases. However, consumers who rely on prepaid cards are only entitled to voluntary protections provided by card issuers when cards are lost or stolen and used to make unauthorized charges. Those voluntary protections come with loopholes and could be subject to change at any time. Prepaid card fees often are poorly disclosed and can make the cost of using these cards much higher than anticipated by consumers.
The letter submitted to the CFPB was signed by Consumers Union, Center for Public Policy Priorities, Center for Responsible Lending, Coalition of Religious Communities, National Consumer Law Center, SC Appleseed Legal Justice Center, and U.S. PIRG.
The groups called on the CFPB to enact a number of mandatory protections for consumers using prepaid cards, including:
• a cap on how much money consumers can lose if their card is lost or stolen or when unauthorized charges are made;
• a guarantee that missing money will be recredited promptly and no later than 10 business days after the consumer reports it;
• clear and conspicuous disclosures of all fees before the consumer signs up to use the card;
• the right to receive a statement or other forms of transaction information; and
• a prohibition on overdraft fees for all prepaid cards.
Contact: Michael McCauley, email@example.com, 415-431-6747, ext 126 or 415-902-9537 (cell)