Pew says prepaid card use up, suggests policies
Prepaid cards were more widely used and became more affordable in 2013 than in years past, according to a new Pew Charitable Trusts report that also presents several policy recommendations as regulators and lawmakers follow the growth of this market.
The report found that consumers who purchased prepaid cards from a bank saved an average of $5 to $14 a month over those who purchased them from nonbanks in 2013. Because of prepaid cards' new popularity – the report found it can often be cheaper to buy a reloadable card than open a savings account at some institutions – Pew offered recommendations for regulators to use when developing rules for prepaid cards, including:
- a prohibition on overdraft or other automated or linked credit features;
- consumer protection against liability for unauthorized transactions;
- consumer access to account information and transaction history; and
- federal insurance against loss caused by the failure of an institution.
CFPB has been looking toward regulating the prepaid market since 2012 and outlined in its regulatory agenda for 2014 that it will address the issue in proposed rulemakings later this year.
Sen. Bob Menendez, D-N.J., introduced a bill in December that addresses some of the above. S. 1867, the "Prepaid Card Consumer Protection Act of 2013," would restrict prepaid card fees, require pre-purchase fee disclosures and provide federal share and deposit coverage for a related new "spending account."
Menendez said this bill will 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.
NAFCU is closely following regulatory and legislative developments for their impact on credit unions.
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