Washington—The Pew Charitable Trusts today commended the Consumer Financial Protection Bureau for putting forward proposed rules that will make general purpose reloadable (GPR) prepaid cards safer and more transparent. Pew said that prepaid card users stand to benefit from CFPB's suggested rules for enhanced consumer protections; however, Pew is also calling for further improvements—including to the proposed consumer disclosures—as the bureau continues its work on the rules.
Pew's consumer banking project has been studying prepaid cards for several years, finding GPR prepaid cards offer great potential, particularly for the "unbanked" and "underbanked." But Pew also has concluded that important consumer safeguards are needed to make these cards an appropriate substitute for checking accounts. Pew's research on prepaid cards can be found at www.pewtrusts.org/money, including past recommendations to the CFPB, some of which are reflected in the agency’s new proposed rules.
In response to CFPB’s announcement, Susan Weinstock, director of Pew’s consumer banking project, issued this statement:
"The CFPB has now taken important steps toward making prepaid cards a safe and viable option for consumers. By proposing to extend the liability protections that cover checking accounts to prepaid cards, the CFPB will give consumers a level of protection they now lack.
"Requiring that any credit offering associated with prepaid cards be safe and fair is another very beneficial element of the proposal. The likely effect will be to keep this product free of excessive overdraft fees. Our research has shown, for example, that controlling spending and avoiding costly overdraft fees are key reasons that draw consumers to prepaid cards.
"Unfortunately, the CFPB’s approach to disclosure will not do enough to eliminate the guesswork in deciding which prepaid card to purchase and use. Mandating full disclosures on card companies' websites, but not at the point of sale, makes it hard for customers to comparison shop, because all the fees would not be listed on the outside of the card packaging.
"It is also important for any final rule to include federal deposit insurance coverage because consumers have no way to know whether the bank holding their prepaid funds is financially sound. The CFPB has the regulatory authority to require this, and it should. We look forward to working with the bureau during the next phase of rule development to incorporate these and other improvements."
Weinstock offered similar comments directly to the CFPB today at its field hearing on prepaid cards, held in Wilmington, Delaware, where she was among those invited to present their views to Director Richard Cordray and his senior staff.
The Pew Charitable Trusts is driven by the power of knowledge to solve today’s most challenging problems. Learn more at www.pewtrusts.org.