CFPB Proposes Stronger Consumer Protections on Prepaid Cards
The Consumer Financial Protection Bureau announced today that it will propose much stronger protections on prepaid cards.
The CFPB proposal would require prepaid companies provide easy and free access to account information, work with consumers to resolve errors, and to limit losses when registered cards are lost or the money in the accounts is stolen. If a consumer promptly notifies their financial institution, the consumer’s responsibility for unauthorized charges would be limited to $50 under these new rules.
Prepaid debit cards have exploded in growth in the past decade. Consumers in 2003 loaded just $1 billion onto these cards. In 2014, that figure could reach close to $100 billion. But prepaid cards can carry high fees, and do not have the protections of other financial products.
“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,” said CFPB Director Richard Cordray in a statement. “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.”
In a report issued last month, the FDIC found unbanked and underbanked consumers turned to prepaid cards more often than other consumers.