Consumer Protections Considered for Prepaid Debit Cards
May 24, 2012
New federal regulations may soon apply to prepaid debit cards, requiring more transparent fee disclosures and greater financial protections. The Consumer Financial Protection Bureau says it is considering new protections for users of these prepaid cards, and it is seeking comment from experts and the public. "We have a duty to make sure these products are safe for consumers and that prepaid card managers do not make money by relying on tricks and traps," CFPB director Richard Cordray said. Prepaid cards often come with high fees applied to various activities, such as reloading money and contacting customer service. They are most popular among Millennials and consumers who earn less than $15,000 a year. Mercator Advisory Group recently estimated that the industry will grow by more than 40 percent in the next two years. However, prepaids lack the same protections as bank-based debit cards, such as when the card is lost or stolen. Supporters of prepaid cards say that many issuers already provide protections voluntarily, but most consumers purchase prepaid cards from sellers that do not offer these protections. "A big part of CFPB [getting involved] is creating a level playing field so people have the same rights and protections on prepaid cards as they do on a debit card," according to Lauren Saunders of the National Consumer Law Center.
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