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US boosts prepaid card protections

05 October 2016  |  4509 views  |  0 credit card

US regulators are clamping down on the fast growing prepaid card market in a bid to give users the same protections offered by credit and debit cards.

The amount Americans put on 'general purpose reloadable' prepaid cards grew from less than $1 billion in 2003 to nearly $65 billion in 2012, with the amount expected to nearly double again by 2018.

But while the cards have proved popular with the underbanked who struggle to obtain more traditional checking accounts, they have also been criticised for high and unclear fees and a lack of protection when funds are stolen or lost.

Under new rules from the Consumer Financial Protection Bureau (CFPB), from next October Americans will have protection against unauthorised transactions if their cards are lost or stolen.

Financial institutions will also have to cooperate with consumers who find unauthorised or fraudulent charges, or other errors, on their accounts to investigate and resolve these incidents in a timely way, and where appropriate, restore missing funds.

In addition, providers will have to make account information - balances, transaction histories and fees that have been levied - available for free upon request, either online, by phone or in writing.

The rules cover traditional prepaid cards as well as mobile wallets, person-to-person payment products like Venmo, and other electronic prepaid accounts that can store funds.

Richard Cordray, director, CFPB, says: "This rule closes loopholes and protects prepaid consumers when they swipe their card, shop online, or scan their smartphone. And it backs up those protections with important new disclosures to let consumers know before they owe."

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