Local Governments Urged to Avoid Unfair Prepaid Card Practices

May 9, 2013
Kansas City infoZine  
payday lending news

Consumers Union is asking city governments not to offer prepaid cards with high fees and few protections. The request comes after Oakland, Calif., launched a dual municipal identification card/prepaid debit card that carries several costly fees. Los Angeles and Richmond, Calif., also are working on their own prepaid cards. In a letter to the League of Cities and the International City/County Management Association, Consumers Union asked local governments to include transparent terms, favorable fee schedules, and strong consumer protections with their debit cards. "If cities want to endorse and offer prepaid cards, they should ensure consumers get a fair deal by keeping fees low and providing strong protections against mistakes and fraud," said Consumers Union senior attorney Michelle Jun. Oakland's card was criticized for costs such as a $2 fee if the user enrolled the card for federal benefits like Social Security income and a 75 cent fee every time the card is used to make a purchase. Oakland has since eliminated the fees associated with loading federal or state benefits and has capped transaction fees at $12.50 per month. The cards still carry a $2.99 monthly fee, a $1.50 fee for using in-network ATMs, and a fee of $1.75 for every call to customer service. The cards also still are not protected by federal regulatory and statutory safeguards in case they are lost or stolen, and users may not have the same FDIC guarantee as bank account holders.
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