The Consumer Financial Protection Bureau (CFPB) finalized their rule this week to make prepaid cards safer. The rule includes many important provisions, such as requiring that the Electronic Funds Transfer Act protections apply to error resolutions, lost cards, and unauthorized transactions, and the rule finalizes a new "Know Before You Owe" disclosures for prepaid accounts to give consumers clear, upfront information about fees and other key details. Though the rule includes valuable improvements to protect users who borrow beyond the balance of their card--such as requiring prepaid companies to underwrite a consumer's ability to repay a loan on their prepaid card and imposing important limits on credit repayment practices--it does not ban overdraft fees entirely.
Center for Responsible Lending (CRL) Executive Vice President Deborah Goldstein released the following statement:
This final rule is strong and will protect families from fraud and other financial abuse. Unbanked consumers rely heavily on prepaid credit cards to make everyday purchases and pay for basic living expenses—now those users will have regulations in place so they can store their money more safely. Though this rule marks significant progress in consumer protection and brings prepaid cards closer to credit card protection standards, it doesn't go far enough to completely eliminate high-cost, abusive overdraft fees. Prepaid cards need to be truly that--prepaid. Often, people, including those with fixed or limited incomes, purchase prepaid cards because they don't want to risk getting harmed by overdraft charges. As we continue to work with consumer advocates across the country, it is CRL's hope that we continue to find ways to end abusive overdraft charges entirely.
In April 2015, CRL submitted its comment to CFPB where it outlined the need to prohibit any overdraft charges on prepaid cards.
For more information, or to arrange an interview with a CRL spokesperson on this issue, please contact Ricardo Quinto at ricardo.quinto@responsiblelending.org.