Feds Unveil Prepaid Card Protection Proposals - Legal News


Credit-Land.com is an independent, advertising-supported web site. Credit-Land.com receives compensation from most credit card issuers whose offers appear on our site. Compensation from our advertising partners impacts how and where their products appear on our site, including, for example, the order in which they may appear within review lists. Credit-Land.com has not reviewed all available credit card offers in the marketplace.

Credit Card Applications » News » Legal » Feds Unveil Prepaid Card Protection Proposals

Feds Unveil Prepaid Card Protection Proposals

Feds Unveil Prepaid Card Protection Proposals
The content is accurate at the time of publication and is subject to change.

Last summer, the Consumer Financial Protection Bureau (CFPB) asked consumers to weigh in with their complaints about prepaid card products. Now they are proposing a host of new protections based in part on that feedback.

Reloadable prepaid cards are an increasingly popular alternative to traditional checking accounts. They are also used for government benefits: the feds stopped issuing paper checks in March 2013. That means people who receive Social Security or other benefits are required to use prepaid cards to collect the funds.

Reloadable prepaid cards are used like credit cards to make purchases, only instead of owing the amount spent to the credit issuers later, consumers deposit money onto their card first, then spend it until the card runs out. People can have their paychecks direct deposited onto a reloadable card, pay bills, make purchases, and get cash from ATMs using their prepaid card.

Know Before You Owe initiative requires two disclosure forms

“Know Before You Owe” is just one of the initiatives the CFPB is recommending the industry adapt; it would ensure that consumers are provided with clear, easy-to-understand disclosures about the fees and risks associated with using prepaid products.

Consumers purchasing a prepaid product would be furnished with two disclosure forms; a short one that gives key information about fees: how much it costs to make a purchase, withdraw cash from an ATM, and the amount of the monthly fee. The longer form would repeat all the fee information on the short form and also include all other possible fees associated with the card or product.

The CFPB said that the disclosures are necessary because customers can’t always see what the fees will be on a prepaid card before they get one. Disclosures and fee schedules are often hidden inside the packaging of the card, or difficult to find online. They hope that creating an industry standard for fee disclosures will make it easier for folks to comparison shop and know exactly what they are purchasing.

Electronic Fund Transfer Act protections would be guaranteed

The CFPB also wants to make sure that prepaid cardholders are protected under the Electronic Fund Transfer Act once they’ve registered their prepaid accounts. These include:

  • Free access to account information. Most prepaid cards do not currently provide customers with monthly statements, and many charge a fee to issue a paper statement. This proposal would require issuers to provide free, easy online access to a record of transactions, balances, and fees.
  • Error resolution rights. Institutions that issue prepaid cards would be required to provide error resolution services to customers who have problems or find mistakes on their prepaid accounts. When folks are incorrectly charged for a purchase, they may not have any recourse.
  • Protection from fraud and card loss. Credit cards, debit cards, and checking accounts all have safeguards in place in case of fraudulent activity or card loss, but prepaid cards usually don’t. Losing a prepaid card is like losing cash; the money may be gone forever. This protection would limit consumer liability in case of fraud or card loss.

Richard Cordray, director of the CFPB, said that the agency aims to make it safer for people to use and rely on prepaid products. “Our proposal would close the loopholes in this market and ensure prepaid consumers are protected whether they are swiping a card, scanning their smartphone, or sending a payment.”

A sample of the proposed disclosures, along with the results of the prepaid card study, is available on the CFPB website.

Disclaimer: This editorial content is not provided or commissioned by the credit card issuer(s). Opinions expressed here are the author's alone, not those of the credit card issuer(s), and have not been reviewed, approved or otherwise endorsed by the credit card issuer(s). Reasonable efforts are made to present accurate information, however all information is presented without warranty. Consult a card's issuing bank for the terms & conditions.
All rates and fees, and other terms and conditions of the products mentioned in this article/post are actual as of the last update date but are subject to change. See the current products' Terms & Conditions on the issuing banks' websites.
Add to Favorites:

Related News:

Feds Launch Financial Coaching Program
Feds Launch Financial Coaching Program

Posted: June 04, 2015

A new program from the Consumer Financial Protection Bureau (CFPB) aims to help veterans and other economically vulnerable folks reach their financial goals through personalized coaching services and education. Continue reading

Feds Add Personal Stories to Consumer Complaint Database
Feds Add Personal Stories to Consumer Complaint Database

Posted: July 06, 2015

The Consumer Financial Protection Bureau (CFPB) has enhanced its consumer complaint database, adding consumer narratives to the existing data. The database was launched in June 2012 and has been periodically expanded since its debut. Continue reading

MasterCard and First Performance Global Expand Their Relationship
MasterCard and First Performance Global Expand Their Relationship

Posted: May 14, 2015

MasterCard has taken its relationship with First Performance Global up a notch, by signing a deal expanding their intellectual property relationship and extending the licensing for its proprietary MasterCard In Control technology. Continue reading

Get the latest news, articles and expert advice delivered to your inbox. It's FREE.
Introducing the New Citi Rewards+ Card - the only credit card that automatically rounds up to the nearest 10 points on every purchase - with no cap
For Excellent, Good Credit
Enjoy 70,000 bonus miles after spending $5,000 on purchases in the first 90 days
For Good/Excellent Credit
See Rates & Fees
Perfect credit not required for approval; we may approve you when others won’t
For Fair/Bad Credit
You've successfully subscribed!

Please specify the following:All these fields are optional

Your Credit History
Themes you are interested in:

By providing this information you help us make our news letters more useful and informative. Thank you!