February 17, 2010

Chairman Ben Bernanke
Federal Reserve Board
20th & C Streets, NW
Washington, DC 20551-0001

Re: Request for clarification that Regulation E defines “account” to include pooled accounts which would provide important consumer protections to general use reloadable prepaid cards and other devices

Dear Chairman Bernanke:

Consumers Union, the nonprofit publisher of Consumer Reports®, Consumer Federation of America, National Consumer Law Center (on behalf of its low income clients), U.S. PIRG, Center for Responsible Lending, Consumer Action and the undersigned consumer and community organizations, respectfully request the Federal Reserve Board to clarify that the definition of account in Regulation E includes pooled accounts into which funds accessed by prepaid cards are placed. This change is essential to fully apply consumer protections in the Electronic Fund Transfer Act (EFTA) to all prepaid cards and other similar devices which function as bank account substitutes.

It is time the Board provides the EFTA’s consumer protections to general use reloadable prepaid cards that operate like and are used like debit cards tied to bank accounts. This includes prepaid cards which many Americans use to set up direct deposits of their pay, benefits or other important funds to manage their household needs. Consumers use these cards as substitutes for bank accounts.

General use reloadable prepaid cardholders should have the same protections that debit cardholders enjoy. They should be assured that losses will be capped when cards are lost or stolen or when unauthorized charges are made. Prepaid cardholders should be assured that missing money will promptly be recredited not later than 10 business days. Cardholders should be given clear and conspicuous disclosures of all fees before signing up. They should have the right to statements. And in the case of electronically accessing an account, their time to dispute an error or unauthorized charge should not begin running until they have accessed the portion of the electronic account information showing the error or the charge.

For the response from the Federal Reserve Board on the issue of prepaid debit cards and obtaining stronger consumer protections, click here.

For the entire letter above in PDF format, click on the link below.