Consumer Advocates: Credit CARD Act Saves $12.6 Billion Annually

On the fifth anniversary of the passage of the federal Credit CARD Act of 2009, a group of consumer advocates praised its effectiveness in saving Americans $12.6 billion per year and urged similar legislation for debit and prepaid cards. Groups ranging from Americans for Financial Reform to Consumer Action to the National Consumer Law Center argue that the controversial legislation has helped eliminate many consumer-unfriendly fees and practices.

“The CARD Act has been hugely successful in banning the biggest unfair credit card gotchas like retroactive interest rate hikes and excessive penalty fees,” says Linda Sherry, Director of National Priorities at Consumer Action. The Consumer Financial Protection Bureau (CFPB) has calculated that the law saves consumers $4 billion per year in fees alone, while another estimate puts the total savings from banned interest charges and fees closer to $13 billion each year.

While Sherry says that more action is needed to bolster credit card protections, like limits on fees and other credit safeguards, she and the other advocates used the anniversary to urge legislation to address problems with debit and prepaid cards. In particular, the groups take aim at overdraft fees, which the Center for Responsible Lending costs consumers nearly $6 billion per year. “Overdraft fees should be completely banned on debit and prepaid card transactions,” says Lauren Saunders, associate director of the National Consumer Law Center. Rather than overdraft fees, Saunders says that transactions can be denied and consumers should have the option of skipping the purchase or paying with credit. “Keeping overdraft fees off of prepaid cards is especially important to keep those cards safe for people who have been shut out of bank accounts.”

The consumer advocates urge lawmakers to pay special attention to prepaid cards, which they say have no consumer protections under federal law or regulations. The CFPB is currently considering new rules to protect debit and prepaid card users. Earlier this year Virginia Senator Mark Warner introduced legislation that would require prepaid card issuers fully disclose fees associated with these products.

Tag: Stored-value card

Consumer Advocates: Credit CARD Act Saves $12.6 Billion Annually

On the fifth anniversary of the passage of the federal Credit CARD Act of 2009, a group of consumer advocates praised its effectiveness in saving Americans $12.6 billion per year and urged similar legislation for debit and prepaid cards. Groups ranging from Americans for Financial Reform to Consumer Action to the National Consumer Law Center argue that the controversial legislation has helped eliminate many consumer-unfriendly fees and practices.

“The CARD Act has been hugely successful in banning the biggest unfair credit card gotchas like retroactive interest rate hikes and excessive penalty fees,” says Linda Sherry, Director of National Priorities at Consumer Action. The Consumer Financial Protection Bureau (CFPB) has calculated that the law saves consumers $4 billion per year in fees alone, while another estimate puts the total savings from banned interest charges and fees closer to $13 billion each year.

While Sherry says that more action is needed to bolster credit card protections, like limits on fees and other credit safeguards, she and the other advocates used the anniversary to urge legislation to address problems with debit and prepaid cards. In particular, the groups take aim at overdraft fees, which the Center for Responsible Lending costs consumers nearly $6 billion per year. “Overdraft fees should be completely banned on debit and prepaid card transactions,” says Lauren Saunders, associate director of the National Consumer Law Center. Rather than overdraft fees, Saunders says that transactions can be denied and consumers should have the option of skipping the purchase or paying with credit. “Keeping overdraft fees off of prepaid cards is especially important to keep those cards safe for people who have been shut out of bank accounts.”

The consumer advocates urge lawmakers to pay special attention to prepaid cards, which they say have no consumer protections under federal law or regulations. The CFPB is currently considering new rules to protect debit and prepaid card users. Earlier this year Virginia Senator Mark Warner introduced legislation that would require prepaid card issuers fully disclose fees associated with these products.

May 27, 2014
Job Corps Debit Card Use Squanders Millions

A new report from the Department of Labor’s Office of Inspector General concluded that prepaid debit cards issued by the Job Corps were misused to the tune of millions of dollars. The Job Corps is a federal agency that provides vocational training and education for young people, especially those deemed to be disadvantaged.

As part of the mission to better prepare young people for employment, the Job Corps picks up the tab for certain travel expenses, including checked baggage fees and meals. In order to cover those expenses, the Job Corps issues prepaid debit cards to the young people it assists. In the period between July 2011 and June 2012, the Job Corps purchased over $21 million via prepaid cards in order to pay for travel and other expenses for young people traveling to and from 125 Job Corps centers across the country.

The Office of Inspector General’s report details widespread misuse of the cards distributed by the Job Corps. In particular, the audit found that the prepaid cards were being used to purchase personal items and to pay for unnecessarily expensive travel. In addition, the report found that hundreds of thousands of dollars were squandered because the government paid excessively high fees associated with prepaid cards and because numerous cards had balances that remained unused. In total, the Office of Inspector General determined that $5.1 million in Job Corps funds had been misused.

The investigation was launched in May of 2012, after allegations surfaced that a Miami Job Corps employee had used hundreds of prepaid cards meant for young people to make personal purchases. The audit was launched in order to answer this question: Were all student travel expenses claimed by Job Corps centers allowable and in accordance with applicable policies and requirements?

The answer to that question was a resounding no. The Office of Inspector General report recommends that the Labor Department’s Assistant Secretary for Employment and Training, who oversees the Job Corps, require new internal controls to ensure that public money is no longer misappropriated.

May 9, 2014

Tag: Stored-value card

Consumer Advocates: Credit CARD Act Saves $12.6 Billion Annually

Job Corps Debit Card Use Squanders Millions