WASHINGTON — Consumer advocates are calling on the Consumer Financial Protection Bureau to provide greater protections for prepaid debit card accounts.
A letter released Friday signed by seven consumer advocacy groups asked the bureau to clarify that the definition of "account" under Regulation E includes the pooled accounts into which funds accessed by prepaid cards are placed. The groups, including Consumers Union, Center for Public Policy Priorities, Center for Responsible Lending, Coalition of Religious Communities, National Consumer Law Center, SC Appleseed Legal Justice Center and U.S. PIRG, said the clarification is essential to ensure prepaid card users have full consumer protections under the Electronic Fund Transfer Act.
"As the cost of bank accounts continue to rise, more and more consumers are turning to prepaid cards as an alternative," Michelle Jun, the senior attorney for Consumers Union, the advocacy arm of Consumer Reports, said in a press release. "But prepaid cards offer weaker protections than bank accounts and can be loaded with hidden fees that make them costly to use."
Jun said prepaid card providers should offer the same protections as traditional debit card provides, and be required to clearly disclose fees up front.
The letter also asked CFPB to implement a number of mandatory protections for prepaid card users, including a cap on how much money consumers can lose if their card is lost or stolen or when unauthorized charges are made; a guarantee that missing money will be recredited promptly and no later than 10 business days after the consumer reports it; a clear and conspicuous disclosures of all fees before the consumer signs up to use the card; the right to receive a statement or other forms of transaction information; and a prohibition on overdraft fees for all prepaid cards.