Prepaid Debit Card Reviews, Complaints, Etc

Tag: consumer financial protection bureau

  • Consumer Financial Protection Bureau’s Proposed Prepaid Card Regulatory Changes Inspires Industry Response

    Consumer Financial Protection Bureau’s Proposed Prepaid Card Regulatory Changes Inspires Industry Response

    When the Consumer Financial Protection Bureau (CFPB) was created in 2010, nobody expected it to play nice with the financial services industry. Authorized as part of the Dodd-Frank legislation, the CFPB was tasked with protecting consumers from predatory lending and other Wall Street abuses that spawned the Great Recession. From the very start, the financial services industry and its allies in Congress resisted the formation of the CFPB, and even successfully torpedoed the choice of now-Senator Elizabeth Warren to lead the agency. Now, a new battle is about to commence: the CFPB is gunning for prepaid regulatory changes.

     

    In the handful of years since the CFPB began its oversight of the financial services industry, it has scored a number of consumer-friendly victories. Largely unheralded by the media, the CFPB has managed to do everything from force credit card issuers to be more transparent about the interest charges related to balance transfers to handling hundreds of thousands of consumer complaints. Red Boxer (CFPB) Squares Off with Blue Boxer (NBPCA)More recently, the CFPB has placed the prepaid debit card industry in its crosshairs and, not coincidentally, triggered concern and angst from the Network Branded Prepaid Card Association (NBPCA), an industry trade group.

    The proposals by the CFPB and the responses from the NBPCA are a classic illustration of the inherent adversarial relationship between regulators charged with protecting the interest of consumers and industry eager to help its businesses remain as profitable as possible. For example:

    • The CFPB would like to apply the more rigorous regulations that apply to credit cards to certain prepaid products, especially those that allow customers to overdraft or overdraw their accounts. This application of what is known as the Federal Reserve’s Regulation Z to certain prepaid cards is opposed by the NBPCA, which says it’s the sort of restrictive regulation that limits options for consumers and may even result in customers opting for riskier products.
    • The CFPB has proposed expanding the definition of what a prepaid debit card is, the result of which would be more an expansion of the number of products subject to government regulations. The NBPCA, by contrast, wants to limit the definition to only primary account transactions, which take the place of a debit card tied to a checking account.
    • There is some overlap in what the industry and the government want to see in the realm of disclosure about fees. Both the CFPB want more disclosure, though the industry group wants a single template for disclosure while the government has proposed a number of them.
    • Even the speed with which the government’s rules would go into effect is a matter of debate. The CFPB has said nine months is plenty of time for prepaid card issuers to adapt to the new rules while the NBPCA believes it will take between 18 and 24 months.

    The final determination about the rules that will govern prepaid cards in the future is still being hashed out. Scales of Justice: CFPB vs NBPCAAnd while it would be easy to decry this sort of back-and-forth as yet another instance of Washington paralysis, there’s a case to be made that this process is working just as it should. No industry wants to bear the increased time and money it requires to comply with new rules and regulations, especially when it comes at the cost of profits. But this adversarial relationship between the prepaid industry and the CFPB could and should result in a range of protections that ensure consumers aren’t victimized. At the same time, the input of industry should ensure that whatever new regulations get enacted don’t drive the efficiency and consumer value out of prepaid debit cards.

    If both happen, then consumers will have more confidence in prepaid cards generally, which is a win for both the CFPB and the NBPCA.

     
     

  • Consumer Financial Protection Bureau Under Fire For Mismanagement, Discrimination

    Consumer Financial Protection Bureau Under Fire For Mismanagement, Discrimination

    When it was first established as part of the sweeping Dodd-Frank bill in 2010 the Consumer Financial Protection Bureau (CFPB) was envisioned as something of a white knight – a good guy with some muscle that could help protect American consumers from too powerful Wall Street bankers. But if recent allegations by CFPB employees that have been aired by congressional investigators and in an in-depth story in The Washington Times are true, many of the agency’s own workers need protection themselves.

    Among the charges included in The Washington Times story about disgruntled Consumer Financial Protection Bureau workers include those of Ali Naraghi, a bank examiner with the CFPB who claims that he was called a “f’ing foreigner” by superiors when he questioned the methodology used to assess financial institutions. Naraghi, who filed a complaint about his treatment by CFPB supervisors and testified before congress, formerly worked at the Federal Reserve, where he received glowing reviews for his performance. By contrast, Naraghi has received the lowest performance rating possible from his bosses at the CFPB since he joined the agency in 2011, a fact he attributes to his raising concerns about what he considered the lack of objectivity in the CFPB’s methodology.

    Other allegations about how the CFPB is run are equally troubling. The Washington Times reports that dozens of agency employees have complained that managers run their departments like “fiefdoms.” “The bureau’s lack of accountability is enabling managers to create their own mini-fiefdoms, stock the ranks of inexperienced and unqualified friends and retaliate against anybody who disagrees with their agenda,” reads the story, written by reporter Kelly Riddell.

    Citing internal agency documents, the newspaper also reports that white employees at the CFPB were twice as likely to receive the highest employee rating than black or Hispanic employees. According to Angela Martin, a CFPB enforcement attorney, there is a division of the CFPB referred to as “The Plantation.” “There is an entire section in Consumer Response Intake that is 100 percent African-Americans, even the contractors, and it’s called “The Plantation.” And people tell me it’s very hard to leave The Plantation. You must be extremely savvy, or you must [have] somebody else [help you] to get out,” Martin testified to congress last spring.

    For its part, the CFPB says it is working with the union representing its employees to address employee complaints and what are alleged to be systemic problems. At the same time, a CFPB spokesperson told The Washington Times that, on average, a survey of employees shows that the agency’s workers are more satisfied with their managers than federal employees as a whole. According to the survey, nearly 75 percent of employees said they had a high level of respect for the agency’s senior leaders, compared to 54 percent of employees across the entire federal government.

  • Get Financially Fit by Avoiding Rising Overdraft and ATM Fees

    Get Financially Fit by Avoiding Rising Overdraft and ATM Fees

    Have you ever made a $20 purchase with a debit card and ended up shelling out $50 because you forgot you didn’t have enough money in your account? If you did have to fork over an additional $30 to pay that dreaded overdraft fee, you’re actually a little bit fortunate. That’s because a new study by Bankrate.com pegs the average overdraft fee at $32.74, a new high as well as the 16th consecutive year the study has found an uptick in the penalty consumers must pay for sending their account into the red. Which all points to the need to avoid overdraft fees in order to remain financially fit.

    As part of its 17th annual Bankrate Checking Survey, the personal finance website surveyed the 10 largest banks and thrifts in 25 of the country’s largest markets. The survey found that overdraft fees also have geographic distinctions. At $34.80, Philadelphia had the highest, while San Francisco had an average fee of $26.74.

    Over the summer the Consumer Financial Protection Bureau (CFPB) put overdraft fees in its cross hairs, noting that the median debit card purchase is just $24. When an overdraft fee of $32.74 kicks in – which consumers typically pay within a few days – the CFPB noted that it amounted to a short-term loan with an interest rate of over 17,000 percent.

    There are ways to avoid overdraft fees. One is to simply decline overdraft protection, which has the effect of disallowing any purchase you don’t have the funds to cover. Another is to sign-up for email or text alerts that make you aware when your account has dwindling funds. Still another is to use prepaid debit cards, which only allow you to spend the amount of money you’ve pre-loaded into the account. While some prepaid debit cards have overdraft protection, it’s wise to decline it.

    The Bankrate survey had more grim news for the users of debit cards. The trend line for ATM fees is similar to that of overdraft charges, with the average cost of using an out-of-network machine reaching a new high of $4.35 per transaction. This charge includes both the fee consumers pay to the owner of the ATM as well as the amount they must pay their own bank for going out of network. As is the case with overdraft fees, location matters. In Phoenix, the average ATM fees were $4.96, while Cincinnati was the lowest at $3.75.

    There was some positive news in the study. This year marked the end of a steady decline in the number of free checking accounts available to consumers. In 2009, 76 percent of non-interest checking accounts did not charge a fee, a number that steadily declined to 39 percent by 2013. This year, though, the percentage seemed to stabilize at 38 percent.

     

     

  • Insights Aplenty in Federal Reserve Payments Study

    Insights Aplenty in Federal Reserve Payments Study

    When most people think of the Federal Reserve – if they consider it at all – it’s when the Fed raises or lowers interest rates. But monetary policy is only one of the tasks the Fed engages in. It also conducts in-depth research in an effort to uncover trends and insights that can benefit consumers, industry and the economy as a whole.

    Recently, the Fed released the 2013 Federal Reserve Payments Study Detailed Report, which examines the use of credit, debit, prepaid debit cards and other forms of alternative payment. Although the information in the report was collected in 2012, it still provides an interesting glimpse into consumer and business use of various forms of plastic, checks and mobile devices.  Among the Federal Reserve Payment Study’s many findings are:

    • For purchases, Americans favor debit cards. On average, Americans made 23 monthly payments using a debit card, with credit cards utilized 11 times and prepaid cards close behind at 10 per month.
    • In total, Americans have 776 million general-purpose cards. Of that number, 334 million are credit cards, 283 million are debit cards and 159 million are prepaid cards.
    • At 305 million versus 28 million, consumers hold far more credit cards than do businesses.
    • ATMs were far more popular for getting cash than over the counter withdrawals. In total, there were 5.8 billion ATM withdrawals, compared to 2.1 billion over the counter.
    • Prepaid cards for public transport and other transportation payments exceeded all other prepaid card payments. In total, there were 9.9 billion payments using prepaid cards for auto tolls and public transport.
    • There were over 250 million mobile payments made utilizing mobile wallet applications.
    • PIN debit and ATM transactions had lower fraud rates than transactions using signature debit or credit cards.
  • CFPB To Police Prepaid Debit Cards

    CFPB To Police Prepaid Debit Cards

    In yet another sign of the mainstreaming of prepaid debit cards, the Consumer Financial Protection Bureau (CFPB) announced this week that it would begin accepting complaints from Americans encountering problems with these increasingly popular financial products. Although the market for prepaid debit cards has been steadily expanding and attracting big name financial players like American Express, consumer advocates have expressed concern about a lack of regulatory oversight.

    The CFPB is in the midst of developing proposed regulations targeted at prepaid debit cards, which should be released in the coming months. In the meantime, the CFPB, the federal government’s consumer watchdog for all manner of financial matters, is urging Americans who have run into problems with prepaid cards to get in touch. “By accepting consumer complaints about prepaid products and certain other services we will be giving people a greater voice in these markets and a place to turn to when they encounter problems,” says CFPB director, Richard Cordray.

    In its statement announcing the move, the CFPB outlined the specific issues consumers should alert it to, including:

    • Trouble managing, opening or closing an account
    • Incorrect or unexpected fees
    • Overdraft issues
    • Frauds, scams or unauthorized transactions
    • Advertising, disclosures and marketing practices
    • Adding money and savings and rewards features

    The CFPB already accepts consumer complaints about a wide range of financial products, including credit cards, mortgages, consumer loans and bank accounts. The CFPB complaint process works like this: After receiving a complaint, the CFPB expects companies to respond within 15 days and outline the steps they plan to take to address the problem. The CFPB also expects some sort of resolution to all complaints within 60 days. Consumers who do submit a complaint receive a tracking number and can follow the process on the CFPB website.

    Complaints about prepaid cards can be submitted through the CFPB website. In the same announcement about accepting prepaid debit card complaints, the CFPB also said that it would begin to address problems with debt settlement and credit repair companies as well as pawn and title loans suppliers.

Prepaid Debit Card Reviews, Complaints, Etc