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The Consumer
Financial Protection Bureau spent two years finishing rules for
the growing industry, projected to reach $121 billion in 2018.
It developed buyer-friendly fee disclosure rules to help
customers avoid fees and charges that the CardHub service has
estimated can cost up to $311 a year.
The bureau also addressed other issues raised in 65,000 comment
letters.
Most of the rules become effective in October 2017, with issuers
required to post detailed customer agreements on the CFPB site
in 2018.
The rules largely put reloadable cards on the same level as
debit cards or checking accounts, requiring providers to give
customers monthly statements or other access to balance
information; to resolve disputed charges quickly; and to limit
customers' liability for charges on stolen cards.
They also curb fees and interest that providers charge when
consumers spend more than the amounts loaded onto the cards.
"Our new rule closes loopholes and protects prepaid consumers
when they swipe their card, shop online, or scan their
smartphone," said CFPB Director Richard Cordray on a call with
reporters on Tuesday.
The CFPB did not directly address outages, where a technological
glitch stops a whole network of cards from working, but
officials said the rules will help consumers affected by a
massive malfunction resolve any problems quickly. In May, an
outage blocked thousands of customers from accessing money on
their Walmart-brand prepaid debit cards issued by the company
GreenDot Corp.
The cards have become alternatives to banking for many,
especially those with lower incomes, as places to store funds,
receive paychecks or benefits disbursments and pay bills. The
accounts are also moving onto phones with services such as
Google Wallet.
According to CardHub, which tracks credit cards across the
country, 23 million consumers used prepaid cards in 2014,
loading a collective total of $76.7 billion onto them.
“The rules bring prepaid cards out of the shadows, with
protections that in many ways are stronger than those for
traditional bank accounts,” said Lauren Saunders, associate
director of the National Consumer Law Center. “Consumers will
have protection from fraud, costs will be more transparent, and
dangerous overdraft fees will be curtailed, but unfortunately
not eliminated."
(Reporting by Lisa Lambert; Editing by David Gregorio)
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