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May 23, 2012

CFPB issues ANPR on prepaid cards

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May 24, 2012 – During a field hearing and in an announcement Wednesday in Durham, N.C., the Consumer Financial Protection Bureau unveiled an advance notice of proposed rulemaking on the regulation of general purpose reloadable prepaid cards.

CFPB Director Richard Corday, in a hearing that was streamed live from the bureau's website, said those who use prepaid cards are often "the most vulnerable among us." The bureau is looking at issues for a rule that would address the general purpose reloadable prepaid card, which is used often as a substitute for a debit card linked to a traditional checking account.

The bureau is evaluating prepaid card fees-and-terms disclosures, unauthorized transactions and product features

There were numerous points of views aired during Wednesday's hearing. On the one hand, there are concerns over high-fee cards often targeted to lower-income consumers. On the other, there is the convenience factor.

Regarding fees, one credit union representative rose to say her institution offers a prepaid card for a $4 monthly fee. A consumer added that, while she has a six-figure income, she uses prepaid cards for the convenience.

The CFPB says the two largest prepaid card program managers in the country have reported growth in the number of active prepaid cards from 3.4 million in 2009 to more than 7 million this year. It said the dollar amount loaded onto prepaid cards is expected to reach $167 billion in 2014.

The bureau is taking comments July 22 on a set of 10 questions about how the bureau should define general purpose reloadable cards under Regulation E, if Reg E coverage should be limited, how to best enable consumers to compare various cards and, among other issues, the provision or lack of federal insurance.

The bureau's Q&A tool, "Ask CFPB," also includes a section on prepaid cards.

Comments on the CFPB ANPR are due to the bureau July 22. NAFCU is preparing a Regulatory Alert seeking members' input to the association's official comment.