Last week, the Consumer Financial Protection hosted a field hearing in Wilmington, DE to discuss proposed regulations for prepaid cards – including how overdraft fees and other credit features should be handled on these prepaid products.
Maura Dundon of the Center for Responsible Lending offered the following remarks:
The CFPB's proposed rule on prepaid cards, announced at a Wilmington field hearing last week, suggests a number of critical protections that will better protect consumers who use these products.
Importantly, the proposed rule would require CARD Act protections – enhanced regulations on credit cards enacted in 2009 – be applied to any prepaid cards that include overdraft charges or other credit features. These protections include an ability to repay standard, at least 21 days to pay the bill without a late fee, and no automatic repayments from the prepaid card balance.
Even with these greater protections, we remain concerned that consumers may not be fully protected against abusive overdraft practices.?Today, overdraft fees generate $17 billion for the banking industry every year - and these charges are often assessed on small debit card transactions that could simply be declined for no fee.
We are encouraged that last week's announcement on prepaid cards serves as a precursor to more comprehensive action on overdraft policies. As the CFPB deliberates on how best to handle the practices, we hope they consider these important points.
To speak with someone about the CFPB's proposed rule on prepaid cards and overdraft policies, please contact Catherine An at catherine.an@responsiblelending.org or 202-349-1878.
For more information, contact Catherine An at catherine.an@responsiblelending.org or 202-349-1878.