Credit and Debit Card Ratings

CFPB Proposes Prepaid Card Rules

After a great deal of speculation, on November 13 the Consumer Financial Protection Bureau (CFPB) unveiled its proposed rules to govern the fast-growing prepaid debit card market. The proposed rules, which are open for public comment for 90 days, are an acknowledgment that more and more Americans utilize the cards to do their everyday banking.

The CFPB’s proposed rules are an effort to provide mainstream consumer protections to products that are no longer on the financial margins. “Consumers are increasingly relying on prepaid products to make products to make purchases and access funds, but they are not guaranteed the same protections or disclosures as traditional bank accounts,” CFPB director Richard Cordray said. “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.”

As proposed, the CFPB rules would safeguard consumers under the Electronic Fund Transfer Act in ways that many credit card holders are already protected. Among the rules are:

• Access to account information: Prepaid card issuers must now either provide periodic statements of account activity or make information about account balances, transactions and fees available for free online. According to the CFPB, nearly half of all prepaid cards currently charge consumers to view their statements.

• Unauthorized charge protection: Today, when some prepaid cards are lost or stolen consumers have no protection for money lost due to fraudulent use of their account. This new rule would limit a consumer’s responsibility to $50 when a card is lost or stolen.

• Error resolution: Financial institutions must now work with prepaid card holders who find errors with their account. Specifically, the new rule obligates card issuers to investigate and resolve errors reported by customers in a timely manner. In cases when an issue can’t be resolved quickly, financial institutions must temporarily credit the disputed amount to a consumer until an investigation is complete.

• “Know Before You Owe”: One of the more nettlesome problems consumers shopping for a prepaid card encounter is an inability to compare and comprehend fees. This rules aims to change that by requiring standard disclosures, including fees for monthly account maintenance, ATM withdrawals, reloading an account and other important fees. In addition, the proposed rule also requires card issuers to make their account agreements online.

 

Tag: Fee

  • Visa Attacks Prepaid Fee Confusion

    Visa Attacks Prepaid Fee Confusion

    It’s getting harder and harder for prepaid card issuers to be sneaky about their fees. Earlier this year the Pew Charitable Trusts issued a report detailing the lack of uniformity when it comes to prepaid fee disclosures and proposed a model disclosure box to make it easy for consumers to compare the fees associated with different products. Soon after that announcement, Chase declared that its Chase Liquid Prepaid Card would adopt Pew’s disclosure suggestions.

    On June 3rd, Visa decided to weigh in on the prepaid fee disclosure issue. Working in conjunction with Pew and the Center for Financial Services Innovation, Visa announced that it has developed an easily understandable designation for consumers to look for in order to know quickly whether a prepaid card meets certain standards related to fees, disclosure and benefits. Prepaid card issuers that qualify can include a seal on their packaging and marketing materials that indicate their compliance with certain criteria. Think of it as a prepaid version of the “fair trade” sticker that graces coffee packaging.

    “We felt it was important to go beyond current requirements in the marketplace and bring transparency to this growing product area,” says Ryan McInerney, president of Visa Inc. “This Visa designation will signify a new level of simplicity, protection and opportunity, enabling cardholders to confidently manage their spending every day.”

    In order to qualify for the Visa designation, prepaid cards must meet a variety of standards such as offering a flat monthly fee that includes all day-to-day uses for the card. In other words, there are a lot of things that prepaid card issuers can’t charge for, such as point of service (POS) cash back, in-network ATM transactions, PIN or signature transaction fees and customer service or overdraft fees.

    Additionally, qualifying cards must also offer specific consumer protections. Among other things, to receive a seal of approval cards have to include FDIC insurance, dispute resolution rights and Visa’s zero liability coverage.

    According to Pew’s Susan Weinstock, who directs the group’s consumer banking initiatives, Visa’s move is important. “Visa is taking an important step forward by acknowledging the importance of clear disclosures and consumer protections,” she says. “It’s particularly encouraging that Visa is not allowing overdrafts on these cards, in light of our research on consumer prepaid card use.”

Credit and Debit Card Ratings