CSFI calls for tighter regulation of pre-paid cards

Source: CSFI

On the day the Consumer Financial Protection Bureau (CFPB) officially opens its doors for business, the Center for Financial Services Innovation released a set of policy recommendations for the CFPB aimed at extending consumer protections to General Purpose Reloadable (GPR) prepaid cards.

"The GPR prepaid card market has reached maturity and federal regulations are warranted," said Melissa Koide, VP Policy, CFSI. "However, this is not just a matter of making prepaid cards safer. Federal rules are good for the market overall, ensuring consistency and clarity for providers and consumers alike. We recognize GPR prepaid cards can provide consumers access to a range of important asset-building financial services, such as savings tools, thus putting consumers on the path to greater financial stability."

CFSI has been studying the evolution of the prepaid card industry since 2004. High quality and affordable GPR prepaid cards are a valuable and needed tool for the financially underserved, and CFSI has supported the development of these products. CFSI's policy efforts have included an in depth analysis of the consumer protections applicable to GPR prepaid card accounts. As a result of this work, CFSI recommends the following:

1) Require all GPR prepaid card providers to list the fees for their products in a standardized and easy to understand fee disclosure box, similar to the "Schumer Box" for credit cards.

All GPR prepaid card fees should be listed in a standardized box, enabling consumers to easily compare costs. Requiring providers to list all fees in this manner will make the products more clear, transparent, and easier to understand. This structure will enable customers to shop across GPR prepaid cards and identify the ones that best meet their needs and their budgets.

2) Require that all GPR prepaid cards have FDIC insurance protection.

Millions of consumers place their wages and benefits in these products. They need confidence that their funds are safe. Mandatory FDIC insurance will assure that. Additionally, the FDIC logo should be displayed prominently on prepaid card providers' websites and on the card packaging in retail locations so consumers can be confident that their funds are fully insured. GPR prepaid cards issued by credit unions should also have full NCUA share insurance and display the NCUA logo in a similar manner.

3) Ensure that consumers have routine access to information about the money in their GPR prepaid cards and that they have protections on their funds like those that are afforded to traditional accounts.

By extending Regulation E of the Electronic Fund Transfer Act to GPR prepaid cards, consumers will have protections against account errors and fraudulent transactions, and they can receive regular account statements. Consumers will be able to request either a one-time paper statement or regular monthly statements at a reasonable cost. This regulatory change will ensure GPR prepaid card consumers receive the same major protections that exist for debit cards linked to bank accounts.

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