The growing popularity of prepaid debit cards has encouraged more companies to enter the industry. In response, Pew Charitable Trusts has worked out a new model disclosure box to help consumers more easily compare card fees and terms; and JPMorgan Chase has signed on as an early adopter, with plans for placement on its Chase Liquid prepaid cards.
The easy-to-understand language is modeled after Pew's disclosure box for checking accounts and also took into account feedback from focus groups in Baltimore, Denver, and Austin. Pew presented the model disclosure box in a new study, “The Need for Improved Disclosures for General Purpose Reloadable Prepaid Cards.” The study discusses the lack of transparency available in current card disclosures. According to Pew researchers, almost all of the 66 cards in the study failed to disclose at least one type of fee, service, or consumer protection.
Susan Weinstock, director of Pew’s safe checking research, recommended that the disclosure box be required by the Consumer Financial Protection Bureau (CFPB) for all general-purpose, reloadable cards. Pew has made other recommendations to the CFPB to ensure the protection of prepaid card users. It has suggested that prepaids not have overdraft or other linked credit features. Cardholders also should be protected against liability for unauthorized transactions if a card is lost or stolen, and they should have access to account information and transaction history. The cards should also be federally insured against loss caused by the failure of a financial institution. Pew additionally recommends the prohibition of pre-dispute binding arbitration clauses that prevent cardholders from having the choice to challenge legal violations in court.