Prepaid Debit Cards Users in U.S. Will Get New Federal Protections
Wednesday, October 5, 2016
Prepaid debit cards are a financial lifeline for many people, but a risky one. They lack many of the basic consumer protections that credit cards and bank debit cards are required to offer. That will change next year, with a raft of new federal rules intended to clamp down on a product that has been growing rapidly despite concerns about high fees, poor disclosures and weak protections for customers when something goes wrong.
Beginning in October 2017, packages containing prepaid debit cards — which are typically sold in convenience stores and other establishments — will be required to carry a standardized disclosure of the card’s monthly fee. They will also have to detail charges for cash withdrawals, customer service calls, reloading the card and other activities.
Such fees, which average around $11 a month and can swallow most of the card’s initial value, have been termed predatory by consumer watchdogs. The new rules, announced early Wednesday by theConsumer Financial Protection Bureau, are meant to shed light on a product that is often the subject of complaints.
“The rules bring prepaid cards out of the shadows, with protections that in many ways are stronger than those for traditional bank accounts,” said Lauren Saunders, the associate director of the National Consumer Law Center, which lobbied for the new rules. For instance, she said, the rules require clear fee disclosures and limits on overdraft fees — protections she would like to see extended to bank accounts.
Source: The New York Times (link opens in a new window)