The Consumer Financial Protection Bureau is seeking comment on what should be included in a forthcoming regulation on prepaid debit cards.
“Right now, prepaid cards have far fewer regulatory protections than bank accounts or debit or credit cards,” the bureau’s director, Richard Cordray, said in an e-mailed statement.
Rules on prepaid cards could squeeze the revenue that companies such as Wal-Mart Stores Inc. (WMT), Green Dot Corp. (GDOT) and NetSpend Holdings Inc. (NTSP) collect on prepaid cards. Mercator Advisory Group, a Maynard, Massachusetts-based consulting firm, says that the amount loaded on prepaid cards in the U.S. is growing by 42 percent per year and will hit $167 billion in 2014, according to the bureau.
The agency is requesting public comment on the new rule by July 22. The regulation will cover so-called general purpose reloadable cards, prepaid cards that can be restocked with cash once the initial amount is drawn down.
The consumer bureau plans to propose a draft regulation by early 2013, according to a person with direct knowledge of its plans.
The bureau is holding a field hearing on its plans for prepaid cards today in Durham, North Carolina. The hearing will include representatives of the prepaid card industry and consumer advocates.
In a statement prepared for the hearing, Cordray stressed that the focus will be on “safety and transparency” in the prepaid card market.
‘Tricks or Traps’
“We believe that innovation can bring great benefits to consumers and can provide those outside the traditional banking system with more access to financial products that meet their needs,” Cordray said in the prepared statement. “But we have a duty to make sure these products are safe for consumers and that prepaid card issuers do not make money by relying on tricks or traps.”
Prepaid cards do not have the same protections as credit cards if they’re lost or stolen, the money they hold is not always insured by the Federal Deposit Insurance Corp., and only sometimes are fees for checking balances or adding value disclosed on the cards’ packaging, according to Cordray’s statement.
On some cards, he said in the statement, “the fees, terms and conditions that apply to the card are printed on an inner flap or in a magnificent origami pamphlet located inside the package.”
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