Prepaid Debit Card Reviews, Complaints, Etc

Tag: debit cards

  • FTC Charges Marketers with Deceiving Small Businesses

    FTC Charges Marketers with Deceiving Small Businesses

    The Federal Trade Commission has charged an operation that sells credit and debit card payment processing services to small businesses with violating federal law.  The FTC seeks to halt the allegedly illegal practices and return money to victims.

    The defendants are Merchant Services Direct, LLC (MSD), also doing business as Sphyra, Inc., Boost Commerce, Inc., Generation Y Investments, LLC., Kyle Lawson Dove; and Shane Patrick Hurley.  The Washington State Attorney General’s Office has simultaneously filed an action against these defendants in the Superior Court for Spokane County, Washington.

     

    According to the FTC’s complaint, MSD agents also dupe customers into leasing new card processing terminals for two to four years, by falsely claiming they are either free, or that their current “swipe” terminals are outdated or incompatible with its services.  Agents then persuade merchants to sign fine-print, binding contracts falsely labeled as applications they are told can be cancelled at any time.  Victims soon discover their new lease obligation after being billed while still owing thousands of dollars on their previous lease.

    Defendants also tout on various versions of their website “Guaranteed Lowest Rates,” claiming merchants could “save 30%” with “whole sale [sic] processing” or have “anywhere from 20% to 30% savings when switching to” MSD.  According to the FTC, there are no wholesale rates, as third parties process card payments, not MSD.  As alleged in the complaint, those who call MSD’s customer service department reach employees who either won’t help or promise to waive fees and issue refunds, but do not.  Customers who were promised they could cancel the “applications” they signed with no penalty are charged substantial cancellation fees, according to the FTC’s complaint.  Generally, only in response to complaints filed with the Better Business Bureau and state attorneys general have the defendants refunded money or waived fees.

    The Commission vote authorizing the staff to file the complaint was 4-0.  The complaint was filed in the U.S. District Court for the Eastern District of Washington.  In addition to filing the lawsuit, the FTC has sought a court order immediately halting the unlawful practices along with an order freezing the defendants’ assets and appointing a receiver over the corporate defendants.

    The FTC acknowledges the assistance of the Washington State Attorney General’s Office and the Better Business Bureau of Eastern Washington, North Idaho, and Montana.

    For more information, visit:  http://www.yumanewsnow.com/index.php/news/latest/3872-ftc-charges-marketers-with-deceiving-small-businesses-into-buying-credit-debit-card-processing-services-and-equipment

     

  • What Fees Are Normal For Secured Credit Cards?

    What Fees Are Normal For Secured Credit Cards?

    Everyone deserves a second chance. That might as well be the marketing slogan for all secured
    credit cards, which can help users prove to lenders, banks, credit card issuers and retailers that
    they can be responsible with money. But the benefits of secured credit cards – which require
    users to put money in the card’s account before they use it, an amount that often serves as the
    credit limit – come at a price: their fees and interest rates.

    Let’s take a look at what you can expect.

    Annual fees and interest rates

    The usual cast of characters, including financial behemoths like Visa, offers secured credit cards.
    What’s normal as far as fees are concerned? Most will have an annual fee, which run in the $29
    to $40 range. For instance, USAA, a financial services company that focuses on military
    personnel, offers a card for $35 per year, while the similar-sounding US Bank charges anywhere
    from $0 to $50. But keep in mind that cards that initially have no annual fee typically begin
    levying one after the first year. And other fees, such as an application fee and fees for ATM
    usage, apply in the first year. Also be on the lookout for fees charged should you spend more
    than your card’s limit as well as for late payments. The list of fees can be quite lengthy; because
    of that it is worthwhile to pore over the terms and conditions of any card you’re seriously
    considering.

    Another thing to consider with the use of a secured credit card – something that is not an issue
    with prepaid debit cards – is interest rates. If you pay your bill on time every month in full,
    interest rates don’t affect you. But if you miss a payment, or fall behind, then you need to know
    what these three letters – APR, which stand for Annual Percentage Rate – mean in terms of your
    money. APR is what the card issuer will charge on your total balance from the minute you are
    late on a payment.

    In general, interest rates for secured credit cards are higher than for regular, unsecured cards,
    although that is not always the case. USAA, for instance, offers a rate of 9.9%, while US Bank
    interest rates vary from 16.24% to 22.99%. Then there are cards that offer 0% APR for the first
    year you have the card, only to jack up the rate starting on day 366.
    There is also the issue of the grace period. With unsecured cards, this period varies from 21 to 25
    days, meaning that credit card issuers must notify cardholders of the balance due and provide at
    least 21 days to pay the balance. The grace period on secured cards can vary, however, and does
    not have to be the minimum 21 days offered on unsecured cards. Some secured cards have no
    grace period, which means the interest begins to accrue from the moment you make a purchase,
    even if you pay your balance in full and on time. While important, all of this discussion about
    late fees and interest rates also highlights another issue. If the very point of getting and using a
    secured credit card is to prove your credit worthiness, missing payments and incurring interest
    charges isn’t the best way to do it.

    How to stay ahead of fees and interest rates

    Review your statements and keep an eye on the APR. No one is going to warn you in big, bold
    letters that it’s changing. The card issuer might provide a notice with print so small you need a
    microscope to read it. But it’s up to you as a consumer to be vigilant.
    Be aware of credit line increases. Just because the card issuer increases your credit availability
    doesn’t mean you must accept it. If you do, you don’t have to spend it. The elevated credit line
    looks good to the credit bureaus that monitor how well you handle credit; spending it and not
    paying it back doesn’t.

    Shop around. If you don’t like the fees and rates on your current secured card, find another.
    Check with credit unions; they are owned and operated by members and not run for profit, which
    often translates into lower fees.

    Beware of scams offered by so-called credit repair companies. These companies will guarantee a
    secured card (an offer of credit is never guaranteed) to clean up your credit history. However, a
    secured card does not “clean up” your history; it helps restore your credit worthiness. These
    offers also tend to involve a call to a “900” number, which will cost you.

  • The Good, The Bad And The Ugly – Card Purchase Disputes

    The Good, The Bad And The Ugly – Card Purchase Disputes

    Looks can be very deceiving. At least that’s the case should you decide to dispute a purchase you made using a prepaid, debit or credit card. While they can all look like the same hunk of plastic –and function with a quick swipe – there’s a very big difference in the legal and consumer rights that back you up if you are unhappy with the quality of the goods that you purchased and enter into a dispute with a merchant.

    In a nutshell, credit cards offer a lot of protection, debit cards a little and prepaid cards none at all. Indeed, with credit card purchases, you have the full force of the Fair Credit Billing Act on your side. Under the Electronic Fund Transfer Act, which covers debit card transactions, you have limited merchant dispute rights, except for unauthorized transactions. And there are no federal consumer protections for purchases made with prepaid debit cards.
    Let’s take a closer look at each.

    Credit cards
    If you have a beef with the quality of something you bought at a store, it’s best if you made the purchase with a credit card. In fact, when disputing a purchase with a credit card, you can request the card issuer charge back the amount of the purchase to the merchant until the dispute is resolved.

    “On a credit card, you have a big advantage and the best protection due to the Fair Credit Billing Act,” says Mary Ann Campbell, a certified financial planner who teaches personal and family finance at the University of Central Arkansas and runs the web site www.moneymagic.com.“You can file a dispute claim and the charge can be charged back to the merchant until the dispute is decided.”

    Debit cards
    Things aren’t so straightforward when it comes to debit cards. When disputing a purchase with a debit card, your rights under federal law are limited, except for unauthorized purchases made with the card. “Consumers don’t have the same protections in the case of debit cards, which are covered by Regulation E, the Electronic Funds Transfer Act,” says Gerri Detweiler, a credit expert, author and host of Talk Credit Radio. “That law gives the consumer the right to dispute a charge in the case of unauthorized use but that’s it.”

    In other words, your best bet when it comes to disputing a charge with a debit card is if you’re the unfortunate victim of a crime or simply lost your card. Otherwise, if you’re unhappy with the quality of an item purchased with a debit card, it’s up to you to try to get the money refunded to your bank account. “If you pay for an item with a debit card and you’re unhappy with the product, you have to get your money back,” says Beverly Harzog, credit card expert and author of the forthcoming book, “Confessions of a Credit Junkie.” “You’ll need to contact the merchant and see if you can return the product or make an exchange. If you can’t work it out, then contact your financial institution for assistance. You will need to fill out paperwork and it may all work out in the end and you could get your money back. But in the meantime, you don’t have access to the amount of money that’s in the dispute.”

    Prepaid debit cards 
    And then there are prepaid debit cards, which offer no federal protections for disputed charges.“With prepaid cards, you will be stuck with the item or out the money,” says Michelle Jun, senior attorney at Consumers Union. You may reach out to your prepaid debit card issuer for assistance with a merchant dispute. Just be aware that any assistance they offer is voluntary. Also, some prepaid debit card issuers may charge fees for customer service calls.

    No matter the type of card you used to buy something, the first step in resolving a dispute with a merchant is contacting the merchant directly. “Regardless of the type of card you’re using, contact the merchant first and try to resolve your issue,” Campbell says. “Put as much in writing as possible to leave a paper trail of documents that might help you plead your case in the future.”

    The Federal Trade Commission offers consumer tips for resolving complaints with merchants and even includes a sample complaint letter.

    According to the FTC, you will want to:
    • Contact the merchant as soon as possible because some retailers have time limits on returns and refunds.
    • Keep a record of your conversations with the retailer including who you spoke with and when, and what action they promised.
    • Ask for a manager if a store employee or customer service rep doesn’t have the authority to help you.

  • The Crime Of Our Century – Prepaid Card Identity Theft

    The Crime Of Our Century – Prepaid Card Identity Theft

    The current boom in identity theft was predictable, maybe even inevitable. It’s a natural result of what we might call “identity inflation.”

    Not so long ago, the information on file about the average American consisted of a fairly small number of paper records, stored in metal cabinets in far-flung offices. People’s financial particulars were usually revealed only to a discreet local banker. Criminal impersonation took time and effort, not to mention lock-picking skills.

    Today, thanks to electronic communication, we routinely share our most sensitive data – whether we know it or not – with people around the world. This information is continuously being collected, organized and stored in cyberspace. All a would-be impostor has to do is locate it.

    By no means are prepaid debit cards immune to this growing threat. In fact, prepaid cards have been involved in some of the most brazen recent cases of identity theft. In May 2013, for instance, the U.S. government alleged that an international ring of crooks had used prepaid cards to loot $45 million from banks in the Middle East. The scheme, as described by the feds, was a blend of high-tech and grass-roots larceny. Hackers “tricked” cards into drastically raising their cash limits. Then a worldwide army of accomplices fanned out to withdraw the money from ATMs before security experts spotted trouble. Most prepaid debit card fraud is not so elaborate. But no one denies that the nature of these cards makes them especially appealing to lawbreakers.

    Crooks are clever
    The well-known 2012 study by the Pew Charitable Trusts noted that “perceived anonymity” is one of the things people like most about prepaid debit cards. And it’s more than just perceived. These cards, once they’re loaded with money, are self-contained spending instruments. Because they are not linked to checking accounts or credit accounts, they don’t help reveal customers’ financial histories or allow for easy tracking.

    An honest consumer’s desire for such anonymity is understandable. But thieves crave anonymity, too, and for all the wrong reasons.

    Taking advantage of the “here-and-gone” potential of prepaid cards, crooks often use them to move ill-gotten funds. More sophisticated scammers, as in the alleged Middle East case, can forge data to temporarily “create” electronic assets, then hurriedly convert them into cash or goods. Once the ruse is recognized, a merchant or financial institution is left holding the bag. Because prepaid card transactions rarely involve big sums, this kind of scheme requires lots of manpower, but recruitment is apparently easy.

    Heists hurt the economy. But should fraud be a concern for you, the law-abiding individual with a prepaid card? Are you personally at risk? The answer, unfortunately, is yes.
    Nationally recognized credit expert John Ulzheimer, no fan of prepaid debit cards, says bluntly, “They facilitate fraud,” he says. “If anyone were to steal or find your card, or otherwise compromise the account information, they could easily use the card or steal its value.” That danger is the flip side of anonymity: A card that acts like cash can be used by anyone. Some cards have fraud protection, but as Ulzheimer points out, many do not.

    What would James Bond do?
    The good news, if there is such a thing, about this fraud vulnerability is that it’s limited. The amount of money on a prepaid debit card is rarely large, and once that money is spent, there’s no more damage the thief can do to you. Ulzheimer acknowledges that “the exposure is relatively low, unless you’re irresponsible and leave the card lying around.”
    Carelessness is obviously foolish. But these days, even ordinary caution may be insufficient. Instead, assume that someone is always spying on you, and treat your prepaid debit card as classified information. Get the safest card you can, especially in terms of fraud protection. Don’t share it or lose sight of it. Don’t even talk casually about having it, any more than you would chat about carrying cash. Use the card only in situations where you feel secure, and beware of bystanders monitoring your actions.
    Don’t feel embarrassed about being vigilant. Scammers who can scoop up millions of dollars in a few hours can bilk you if you give them the least opportunity. If all this talk of identity theft and stolen data makes you feel besieged by mysterious forces beyond your control, Ulzheimer has a realistic reminder about prepaid debit cards. Maybe it’s reassuring. Or maybe not.

    “Most fraud is perpetrated by family and friends,” he says.

  • The Battle Over Swipe Fees

    The Battle Over Swipe Fees

    When the so-called Dodd-Frank law passed in 2010, one of its measures was pretty easy to quantify. A sprawling, complicated and controversial piece of legislation aimed at taming the most egregious of abuses perpetrated by the financial services industry in the years before the 2008 financial collapse, Dodd-Frank also addressed the amount of money debit card issuers could charge retailers when a customer made a purchase with plastic. The Federal Reserve was tasked with deciding what the cap should be and eventually settled on a number just below 25 cents per transaction. Estimates on the impact of the ceiling on that fee– known as a swipe fee because it’s a charge that gets racked up when a retailer swipes a card – on banks and card processors come to around $8 billion annually, a hefty chunk of change.

    According to a recent report from Bloomberg News, banks and payment networks are working hard in state capitals around the country in an effort to prevent restaurant and clothing storeowners from charging their clients more to pay their tabs with credit cards than they do for debit card and cash transactions. According to the Bloomberg story, written by reporter Carter Dougherty, banks and their allies have already been successful in banning surcharges on credit card purchases in Utah, and around 20 other states are also considering bills related to swipe fees.

    In a nutshell, what the legislative initiatives in Utah and other states is aimed at doing is preventing retailers from urging – particularly through the use of surcharges – their customers from opting for cash or debit cards over credit. At issue, of course, is money. Banks and card processors are eager to keep as many customers as possible in the habit of using their credit cards when they buy a meal or an iPod; according to the Bloomberg report, card issuers earn between 1 and 3 percent of a transaction whenever someone uses their Visa, MasterCard or American Express card.

    Not surprisingly, retailers want to see swipe fees associated with credit cards as low as possible, contending that they are already too much of an unfair cash cow for banks. “I view the banks and credit-card companies as unwanted business partners. They do not work anywhere near as hard as I do, yet they collect nearly as much in fees as the average restaurant earns in profit,” wrote Ted Burke, the co-owner of the Shadowbrook Restaurant in Capitola, California, in the San Francisco Chronicle. “Business owners like me can negotiate virtually all of our costs, but we are powerless to negotiate swipe fees.” If banks and card processors are successful on the state level, many retailers also won’t be able to encourage customers to opt for lower fee debit cards. Under federal law, business a credit card transaction can cost a consumer more than a debit or cash purchase.

  • Reports Show Bank Customers Need More Protection From Debit Card Overdraft Fees

    Reports Show Bank Customers Need More Protection From Debit Card Overdraft Fees

    A report released this week by the Consumer Financial Protection Bureau shows bank customers need more protection from debit card overdraft fees.  The report focuses on overdraft fees banks charge customers when they overdraw their checking account with a debit or ATM card.

    Before mid-2010, when customers didn’t have enough money on their checking account to cover transactions, most banks would allow the purchase to go through and charge an overdraft fee.  This would result in multiple overdraft fees for the customer.  In 2009, the Federal Reserve adopted a new rule that prohibited banks from charging overdraft fees unless customers opted into an overdraft program in advance.

    The CFPB study found that not only did a large number of customers sign up for overdraft protection, but they continued to rack up fees.  The study also found customers who had been charged overdraft fees before the opt-in rule were more likely to opt in than those who had not been hit with overdrafts.  It also showed the more overdraft charges they had incurred before the rule, the more likely they were to opt in.  Customers who incurred at least one overdraft or bounced check fee in 2011 paid an average of $225 in overdraft fees that year.

    Banks say overdraft protection is a service some customers want and are willing to pay for.  Consumer groups say banks are luring customers into the program with confusing disclosures and marketing pitches.  “So-called ‘overdraft protection’ programs are really just a way for banks to bilk their most vulnerable customers with costly fees,” Consumers Union says in a press release.

    “We need to determine whether banks and credit unions are causing the kind of consumer harm that the federal consumer protections laws are designed to prevent,” said CFPB Director Richard Cordray.

    Consumers Union says the report “underscores the need for new reforms to protect customers from unfair checking account overdraft programs.”  It urges the bureau and other federal regulators to simplify disclosures of overdraft policies, require that overdraft fees be reasonable and proportional to the financial institution’s cost, limit the number of overdraft fees that can be charged per day and year and prohibit banks from processing daily transactions in a way that maximizes fees.  A bill sponsored by Rep. Carolyn Maloney, D-N.Y, would do many of those things including limiting fees o one per month and six per year.

    For more information on the CFPB Study of Overdraft Programs, visit:  http://files.consumerfinance.gov/f/201306_cfpb_whitepaper_overdraft-practices.pdf

    For more information on this article, visit:  http://blog.sfgate.com/pender/2013/06/11/bank-customers-still-racking-up-debit-card-overdraft-fees-report-says/

Prepaid Debit Card Reviews, Complaints, Etc