Tags: Consumer | Protections | Prepaid Cards | Shoppers

US Consumer Bureau Proposes New Rules for Prepaid Cards

Thursday, 13 Nov 2014 07:36 AM

The U.S. consumer watchdog on Thursday proposed new rules requiring prepaid product companies to disclose fees and offer other protections to people who buy their cards.

Consumers use prepaid products to load money into accounts that can be used to make payments or get cash. Some people use the products because they do not have a bank account, while others use them to control their spending.

The Consumer Financial Protection Bureau (CFPB) said consumers put nearly $65 billion into such accounts in 2012.

Unlike checking accounts and other bank services, prepaid cards have not been not subject to rules that allow consumers to access account information for free or that limit their responsibility for lost or stolen cards.

On Thursday, the bureau proposed extending numerous such protections to consumers using prepaid products.

"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," CFPB director Richard Cordray said in a statement.

The bureau said its rules would apply to plastic cards that function like debit cards and are sold at retailers such as Walmart. Green Dot Corp is one of the biggest issuers of these cards.

The rules also would apply to electronic accounts that store funds, such as eBay's PayPal and Google Wallet.

The CFPB was created by the 2010 Dodd-Frank law and charged with overseeing consumer financial products such as mortgages and credit cards. It announced in May 2012 that it was considering rules for the prepaid market.

The bureau also unveiled new disclosure forms to explain any fees or costs to withdraw cash that come with prepaid cards.

Most prepaid products allow customers to spend only the money in their accounts, but some offer forms of credit, including overdrafts. Consumer advocates say this defeats the purpose of the products, and they have called for the bureau to ban overdrafts on prepaid accounts.

On Thursday, the bureau said companies must wait 30 days after a customer opens an account before extending credit. They also must ensure the consumer can repay the debt, and they cannot automatically deduct payments from the prepaid account.

Stakeholders have 90 days to comment on the proposal, after which the bureau will consider finalizing the rules.

© 2017 Thomson/Reuters. All rights reserved.

 
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The U.S. consumer watchdog on Thursday proposed new rules requiring prepaid product companies to disclose fees and offer other protections to people who buy their cards.
Consumer, Protections, Prepaid Cards, Shoppers
379
2014-36-13
Thursday, 13 Nov 2014 07:36 AM
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