The Consumer Financial Protection Bureau (CFPB) has proposed new debit-card disclosures that resemble the nutrition labels found on food packaging. Consumer advocates, however, say the labels would do little good to help warn cardholders of fees or predatory lending.
Prepaid debit cards have become the country's most fastest-growing form of payment. Consumers loaded about $83 billion onto them in 2012, the Mercator Advisory Group estimates. Typically, the cards are accompanied by fees that can reach up to $360 a year, according to a 2013 report by CardHub.com.
Because each company has its own way of disclosing fees to consumers, the CFPB believes that uniform labels can improve transparency. The agency last week began crowdsourcing two templates for a standardized packaging label. The templates include a breakdown of several actions that most often trigger extra charges: making a withdrawal, using an ATM, calling customer service, replacing a card, using online bill pay, and monthly maintenance. Critics of the idea, however, say that highlighting only some of the fees may lead consumers to believe those are the only extra expenses they will incur.
The CFPB says a disclosure box is just the first step in its efforts to regulate the prepaid card market. The agency is also looking into how to handle fraudulent charges and small-dollar loans that involve prepaid cards. “Like our tests of other model disclosures, this is an iterative process and we will incorporate the comments we receive into the next prototype that we test,” said Eric Goldberg, senior counsel at the CFPB.