Dec. 30, 2013 – Legislation to restrict prepaid card fees, require pre-purchase fee disclosures and provide federal share and deposit coverage for a related new “spending account” was introduced Dec. 19 by Sen. Bob Menendez, D-N.J.
Carrie Hunt, NAFCU's senior vice president of government affairs and
general counsel, said the association "will carefully review the bill
and, if necessary, work with policy makers to mitigate any regulatory
S. 1867, the “Prepaid Card Consumer Protection Act of 2013,” is similar to bills Menendez introduced in 2010 and 2011. Menendez says it would provide Electronic Funds Transfer Act protection in the event a prepaid card is lost or stolen, and provide for federal share or deposit insurance (from NCUA or FDIC) if the card company goes bankrupt.
In his announcement, Menendez cited 2012 findings by Pew Charitable Trusts on how much consumers spend yearly on prepaid cards, from an average low of $340 a year to nearly $1,300.
S. 1867 would create a new category of consumer depository institution account, called a “spending account,” that would have federal share or deposit insurance. Such accounts would be available to hold funds for reloadable, general-purpose prepaid cards; and for certain nonreloadable, general-purpose prepaid cards holding more than $250.
The spending account could not be used for prepaid items such as gift cards, gift certificates or federal health care savings, among other things. The bill also addresses employee wages and federal benefit payments and spells out notice and disclosure requirements.
If the bill were enacted, CFPB would have 12 months to issue regulations and complete a plan for a study. The study would focus on the short- and long-term economic well-being of consumers at different income levels who use spending accounts instead of traditional accounts as their primary means for conducting financial transactions.
Sens. Richard Blumenthal, D-Conn., and Jeff Merkley, D-Ore., are cosponsors.