Consumer Groups Urge CFPB to Impose Greater Protections for Prepaid Cards

November 21, 2011
American Banker 
consumer financial protection bureau news

Consumer advocates are pressing the Consumer Financial Protection Bureau to extend greater protections for prepaid debit card accounts. A letter released on Nov. 18 and signed by seven advocacy groups asked the fledgling agency to clarify that the definition of "account" under Regulation E includes the pooled accounts into which funds accessed by prepaid cards are placed. The organizations -- the Center for Responsible Lending, National Consumer Law Center, and Consumers Union among them -- said the clarification is essential to ensure that prepaid card users have full consumer protections under the Electronic Fund Transfer Act. "As the cost of bank accounts continue to rise, more and more consumers are turning to prepaid cards as an alternative," stated Consumers Union senior attorney Michelle Jun. "But prepaid cards offer weaker protections than bank accounts and can be loaded with hidden fees that make them costly to use." To correct that, Consumers Union and the other advocates are requesting that the CFPB limit how much money consumers can lose if their card is stolen or lost; that card issuers be required to clearly and conspicuously disclose all fees upfront; and that overdraft fees on all prepaid cards be banned, among other protections.
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