Photo (cc) by EricaJoy
The Consumer Financial Protection Bureau has proposed new rules that would extend a number of the financial protections of bank accounts to prepaid cards.
The prepaid market has experienced rapid growth in recent years. According to the CFPB, the amount of money loaded onto general purpose reloadable cards has gone from less than $1 billion in 2003 to nearly $100 billion by the end of 2014.
“Consumers are increasingly relying on prepaid 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 in a statement. “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.”
The proposed new rules include:
- Prepaid protections. These would expand the limited federal consumer protections available for prepaid accounts now. The proposal includes protections similar to those provided to checking account customers, including free access to account balance and history, error resolution rights, and protection against fraud or a lost card.
- Disclosure of fees. Currently many prepaid cards’ fees and disclosures are inaccessible before purchase because they’re sealed inside the card’s packaging or they’re hard to find online. The CFPB proposal would require that companies adopt an industry standard for disclosures so consumers can comparison shop. The CFPB also wants to require that prepaid card companies post their card agreements on their websites, as well as on a CFPB website.
- Credit protections. Although most prepaid products only allow customers to spend what they have in their account, some companies offer credit products and overdrafts. Under the new rules, if a consumer opts to “use a credit product related to their prepaid account, they would be entitled to the same protections that credit card consumers receive today,” the CFPB said. Those protections include assessing a consumer’s ability to pay before extending credit and access to a monthly billing statement, among others.
The proposed rules would cover a broad spectrum of prepaid cards, including traditional plastic cards that are used like debit cards, as well as payroll cards, some government benefit cards, and mobile and electronic accounts that store funds, such as PayPal and Google Wallet.
“Though many prepaid companies already have opted to offer some of these basic, common-sense protections, it is important to ensure that they are not simply optional but instead are cemented as the standard for the industry and enshrined in law,” Cordray said.
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