The Consumer Financial Protection Bureau (CFPB) is taking on the unregulated prepaid card market. Prepaid cards are not just gift cards anymore; they have become a growing financial product as consumers turn to prepaid cards in favor of traditional checking accounts. In 2001, an estimated $57 billion was loaded onto prepaid cards, and this figure is protected to grow 47% to $167 billion by 2014. Despite their popularity, the prepaid card market is unregulated at the federal level and leaves consumers vulnerable. In many cases, prepaid cards have high fees and, depending on how they are structured, may not have FDIC insurance, which protects deposits up to $250,000.
Recently the CFPB launched Ask CFPB: Prepaid Cards to shed some light on the mystery and perplexity around this product. Specifically, on May 23rd, in Durham, North Carolina, CFPB Director Richard Cordray announced that the Bureau is asking for comments on general purpose reloadable prepaid cards (GPR). As the CFPB begins to evaluate its options for regulating the prepaid card industry, the Bureau is specifically interested in comments about the appropriate scope of regulatory coverage, product fee disclosures, product features, whether a savings component should be required, and other GPR specific consumer protections.
A recent report from Reinvestment Partners listed eight principles for the reform of the prepaid debit card. The top recommendations include not allowing line of credit or overdraft features, ensuring that such cards have all of the functionality of a low-cost checking account and all of the consumer protections of deposit accounts.
Be sure to let the CFPB know your thoughts as it begins to examine how to provide safety and transparency to the growing prepaid card market. Click here to submit your comments to the CFPB.