Prepaid cards hit with new rules

Federal regulators are taking aim at prepaid credit cards with new rules intended to govern a burgeoning $100 billion industry.

Rules are already in place for credit and debit cards, but the Consumer Financial Protection Bureau has not imposed regulations on the prepaid card industry.

{mosads}“Consumers are increasingly relying on prepaid products to make purchases and access funds, but they are not guaranteed the same protections or disclosures as traditional bank accounts,” CFPB Director Richard Cordray said in a statement. “Our proposal would close the loopholes in this market and ensure prepaid consumers are protected whether they are swiping a card, scanning their smartphone, or sending a payment.”

Consumers load money onto prepaid cards as an alternative to opening a checking account or applying for a credit card. The cards are one of the few financial instruments that remain largely unregulated.

Under the proposed rules, prepaid lenders would be required to disclose information about monthly fees, purchase fees, ATM fees, and the fee to reload the cards. They would also be required to provide consumers with access to important account information, such as their balances and a history of their transactions.

Prepaid lenders would also be required to investigate and resolve issues in a timely manner, and limit customers’ losses to $50 when a card is stolen, the agency said.

The rules would also offer protections for consumers who are using prepaid cards as credit cards by spending more money than they have loaded onto the card. 

“Many of these prepaid consumers are living paycheck to paycheck, and are engaged in a constant battle to make ends meet,” Cordray said. “They are some of the most economically vulnerable among us, and most of them have no idea that the prepaid cards they choose to purchase are largely unregulated at the federal level and carry few if any protections under federal consumer financial law.”