Prepaid debit cards have their advantages as a safer alternative to cash. Nevertheless, some prepaid card issuers may have been causing users more of an injustice than a service, according to the Attorney General of Florida, Pam Bondi.
Companies Under Fire
Five companies that offer prepaid debit cards are under investigation by the Attorney General’s Economic Crimes Division. The prepaid cards under scrutiny are not affiliated with any banks. The five companies involved are accused of charging excessive and undisclosed fees that can eat up a goodly amount of the cash deposited on the card. Common charges associated with the prepaid cards include fees for reloading funds and transaction fees assessed with each purchase.
The five prepaid debit card issuers named in the investigation are:
- First Data Corp.
- Green Dot Corp.
- Account Now Inc.
- NetSpend Corp.
- Unirush Financial Services LLC
Subpoenaed for Information
To kick-start the investigation, subpoenas have been sent to several of the issuers. The subpoenas request that the companies provide information that specifically pertains to the fees it charges users of the cards and how the fee structure is communicated.
The subpoenas also question the deceptive practice of promising to improve customers’ credit scores with the use of the cards. Prepaid debit cards do not involve an actual credit line; users simply load their own funds onto the cards, use the money available and then reload them. Because they have extended no credit, the issuers of the prepaid cards do not report any data about the use of the cards to credit bureaus, meaning their use has no effect on clients’ credit scores. Despite this, some issuers advertise building credit as a benefit of their prepaid cards.
Prepaid Cards are Big Business
The prepaid card industry, which generally serves consumers with poor or no credit, is booming. According to the Mercator Advisory Group, the amount of money loaded onto prepaid credit cards is expected to grow from $36.6 billion in 2010 to $118.5 billion next year. MasterCard forecast an astonishing $840 billion in prepaid loadings by 2017.
With so many consumers using prepaid cards, and so much money at stake, the aim of the Florida investigation is to make sure that consumers are not subject to false claims and deceptive and dishonest practices.