By Anna Low-Beer, U.S. PIRG
Commonsense consumer protections for prepaid cards against fraud, hidden fees and overdraft charges are on the Congressional chopping block. Resolutions have been introduced in both the House and the Senate that would roll back an important prepaid card rule created by the Consumer Financial Protection Bureau last year. Even if you’re unfamiliar with prepaid cards, you might know someone who uses one.
About 23 million Americans use prepaid cards monthly, and that number is on the rise. The Consumer Bureau found that Americans spent $1 billion on prepaid cards in 2003, but that number jumped to $65 billion in 2013 and is expected to grow to $112 billion by 2018. Consumers use prepaid cards for a range of reasons, but the most common factor in choosing prepaid is to gain control of one’s finances according to a Pew report. “This way they know they can put a certain amount on the card and spend that and no more,” says Pew’s Alex Horowitz.
The CPFB’s rule would finally bring the same transparency and basic protections against unauthorized charges, theft and loss that credit card users and those with checking accounts currently have to prepaid card users. “Many consumers rely on prepaid cards to make purchases and access funds, but until now they were not guaranteed strong consumer protections under federal law,” said CFPB Director Richard Cordray. The rule was set to go into effect in October of this year, but it’s now being threatened in Congress.
And the prepaid card rule isn’t just a good thing for consumers. The vast majority of the prepaid card industry itself supports these commonsense protections. Green Dot CEO, Steve Streit, spoke highly of the rule last year. “It’s gratifying to know that prepaid [cards] can now move to a level playing field that can better serve consumers,” he said. But one company, Netspend, has lobbied and made campaign contributions to Congress against the rule because it stands to lose $80 million a year on overdraft fees.
The prepaid card industry is only growing, and it’s about time this financial industry is regulated just like any other. Congress must stand up for the millions of Americans who use prepaid cards and deserve basic protections against fraud, hidden fees and more. Sign our petition to save the prepaid card rule here.