WILMINGTON, Del.– The Consumer Financial Protection Bureau today will propose strong, new federal consumer protections for the prepaid market.
The proposal, to be presented during a field hearing here on prepaid accounts, would apply a number of federal consumer protections to the prepaid market for the first time. The proposal would cover traditional plastic prepaid cards, many of which are general purpose reloadable cards.
In addition, the CFPB said in a release that its proposal would cover mobile and other electronic prepaid accounts that can store funds. The prepaid products covered by the proposal also include: payroll cards; certain federal, state, and local government benefit cards such as those used to distribute unemployment insurance, child support, and pension payments; student financial aid disbursement cards; tax refund cards; and peer-to-peer payment products.
The CFPB stated the proposal would require prepaid companies to limit consumers’ losses when funds are stolen or cards are lost, investigate and resolve errors, provide easy and free access to account information, and adhere to credit card protections if a credit product is offered in connection with a prepaid account.
The Bureau is also proposing new “Know Before You Owe” prepaid disclosures that would provide consumers with clear information about the costs and risks of prepaid products upfront.
According to the release, CFPB Director Richard Cordray’s prepared remarks will emphasize how consumers are increasingly relying on prepaid products to make purchases and access funds, “but they are not guaranteed the same protections or disclosures as traditional bank accounts. Our proposal would close the loopholes in this market and ensure prepaid consumers are protected whether they are swiping a card, scanning their smartphone, or sending a payment.”
The CFPB stated that the protections are similar to those checking account consumers already receive, and include:
- Easy and free access to account information: Under the CFPB proposal, financial institutions would be required to either provide periodic statements or make account information easily accessible online and for free.
- Error resolution rights: The proposed rule would require financial institutions to work with consumers who encounter errors with their account.
- Fraud and lost-card protection: The proposal would protect consumers against unauthorized, erroneous, or fraudulent withdrawals or purchases, including when registered cards are lost or stolen.
The CFPB proposal also includes new “Know Before You Owe” prepaid disclosures that would provide consumers with standard, easy-to-understand information about the prepaid account. Under the proposal, prepaid consumers would have access to:
- Standard, easy-to-understand information upfront: The CFPB’s proposal includes two required forms, one short and one long, with easy-to-understand disclosures. The short form would concisely and clearly highlight key prepaid account information, including common costs like the monthly fee, fee per purchase, ATM withdrawal cost, and fee to reload cash onto the account. In addition, under the CFPB’s proposal, consumers would have to receive or have access to a full set of the account’s fees and related information before acquiring the account. The long form would contain all of the fees on the short form, plus any other potential fees that could be imposed in connection with the account.
- Publicly available card agreements: To facilitate comparison shopping, this proposal would require that prepaid account issuers post their account agreements on their websites. Additionally, issuers would be required to submit those agreements to the Bureau for posting on a public, Bureau-maintained website.
Related links
CFPB Proposes 'No Action Letter' Policy
CFPB To Host Field Hearing on Prepaid Cards