The National Consumer Law Center, on behalf of its low-income clients as well as the Consumer Federation of America and Consumers Union, submit these comments regarding the Interim Final Rule allowing federal payments to be deposited on prepaid cards. We particularly commend the Treasury Department for the new consumer protections required to be provided to recipients of federal benefits through prepaid cards.

The most important of these new protections is the prohibition against allowing the provider of the prepaid card to attach to the card “a line of credit or loan agreement under which repayment from the account is triggered upon delivery of the Federal payments.” While the Interim Final Rule includes substantial new protections that were not included in the proposed rule, there remains several areas in need of improvement or clarification.

In these comments, we will address the following issues:

1. The protections against credit collected from prepaid cards in this Interim Final Rule are very good, but clarifications are needed on this and other consumer protections.
2. Treasury should delay the use of prepaid cards – other than the Direct Express Card – for federal payments until official Regulation E protection is applicable and until prepaid cards have better protection against abusive fees and unauthorized charges and errors than is provided by the payroll card rule.
3. The definition of “prepaid card” is overbroad and duplicative. Instead, Treasury should use the existing Regulation E definition of “general-use prepaid card.”
4. Clearer enforcement strategies are necessary to ensure that the consumer protections are actually effective.
5. Treasury must identify and stop all deposits to noncomplying subaccounts.