ADVERTISER DISCLOSURE
AcclaimVisa.com is an independent, advertising-supported web site. AcclaimVisa.com is compensated by the credit card issuers whose offers appear on our site. This compensation can impact how and where credit products appear on our site, including, for example, the order in which they may appear within product listings. AcclaimVisa.com does not offer, review or present all available credit offers.

Government Strives to Protect Prepaid Card Users

[Sunday, September 15th, 2013]

Prepaid cards are more popular than ever these days, providing an easy way for people to pay for everything from parking spots to meals at their favorite restaurants. But the government is concerned that their popularity is growing faster than the protection provided to consumers.

Though prepaid cards are touted as an alternative to credit cards and debit cards, those types of cards have protections in place, such as Federal Deposit Insurance Corporation (FDIC). Banks will usually refund money fraudulently spent on a debit card, and credit card issuers have numerous measures in place to prevent fraud loss for customers. However, prepaid cards must be treated like cash in most instances—if they are lost, anyone can use them and the money is gone, with no recourse for the cardholder.

If the Consumer Financial Protection Bureau (CFPB) gets its way, this will not be the case for long. Richard Cordray, director of the Obama-created agency, says that putting regulatory protections in place is vital, and the CFPB is launching a rulemaking event in order to “promote safety and transparency in this emerging market.”

Among the concerns raised by the CFPB are the transparency of fees and the clarity of terms and conditions on the cards. Prepaid cards typically come with fees, which can be high in some cases. Though many cards have no monthly fee, some charge customers as much as $14.95 per month just to use the card, as well as charging for transactions like getting money at an ATM, reloading the card or transferring money from a bank account or credit card.

The Advanced Notice of Proposed Rulemaking is the first step in the CFPB’s quest to create consumer protections. The agency will gather information from consumers and issuers, asking questions and crafting proposed rules. They have also introduced a database of consumer information on their site, via a searchable online tool called “Ask CFPB: Prepaid Cards.” This has more than 80 commonly asked questions about how prepaid cards work, from how to get them and use them to how to reload them and what the fees are for.

General-purpose reloadable cards –the target of this rulemaking – are similar to store gift cards, except they can be used anywhere that accepts credit cards. They can be given as gifts, but are also popular among parents who want to give their kids a safe way to spend money when they are away from home. College students often pack a prepaid card from mom and dad when they go off to school.

People without bank accounts often use prepaid cards as well. Whether they cannot qualify for a bank account or just want to avoid checking account fees, these unbanked customers can use prepaid cards to pay bills, make purchases, get cash at ATMs and transfer money to a friend or relative. From 2010 to 2011, there was nearly a 70% increase in funds directly deposited onto prepaid cards.

Cordray stressed that prepaid cards are often used by vulnerable members of the population and it is therefore urgent that proper protections be put into place to safeguard them.

Copyright © 2006-2017
AcclaimVisa.com.
All Rights Reserved

AcclaimVisa.com is an independent, advertising-supported web site. AcclaimVisa.com is compensated by the credit card issuers whose offers appear on our site. This compensation can impact how and where credit products appear on our site, including, for example, the order in which they may appear within product listings. AcclaimVisa.com does not offer, review or present all available credit offers.

All the credit card information presented without warranty and can change. To confirm the terms and conditions click the "Apply Now!" button and review the current information on a secure credit card terms page. AcclaimVisa.com can be compensated by the credit card issuers when visitors apply for a credit card through this website.

* The acclaimvisa.com webpage is a free service and an information resource for credit cards and financial products and services available to eligible United States consumers. acclaimvisa.com does not offer any warranties and is not a direct service. There are no guarantees for approval or offers when applying for a credit card. Please refer to the application if you would like more information on each credit card. When you click "Apply" for a particular credit card, please take the time to review the terms and conditions of the product/service at the issuer's website. All logos on the acclaimvisa.com website are property of their respective owners.

Disclosure: Not an access card.