Prepaid companies have lowered their card fees over the past few years, but now regulators may give the still-fractured industry another push towards simpler prices.
Prepaid cards appeal to a diverse and growing consumer base, and more established companies, including NetSpend Corp. and Green Dot Corp., are finding themselves increasingly competing with new entrants, including banks.
Some prepaid operators, including some companies affiliated with celebrities, have been criticized for charging confusing, poorly disclosed and predatory fees. Now that the Consumer Financial Protection Bureau is starting to pay closer attention to those fees, industry members expect to see additional streamlining–and reform–of how prepaid companies charge customers (
"In some ways, as regulations around things like disclosures come in, then the fees will get simpler and get more competitive as different companies try to angle to pick up more customers," says Ben Jackson, a senior analyst at Mercator Advisory Group.
The bureau said last week that it plans to issue a rule to regulate the general-purpose reloadable prepaid industry. Regulators are now soliciting comments on industry practices and have asked for feedback on numerous issues, including several questions about how prepaid providers disclose fees and how consumers can best compare products.
"There is a lot of variation in the fee models for [general-purpose reloadable] cards, and that's due in my view to the fact that there are a lot of different consumers who use these cards differently. Certain fee models will be attractive for one demographic and another will be attractive for another," says Chris Daniel, a partner at law firm Paul Hastings.
Just after the bureau stated it would extend Regulation E safeguards to prepaid cards, industry analysts and consumer advocates spoke out quickly about the need for the bureau to consider regulations regarding fees and disclosure of those fees (
Despite ongoing concerns about the level and number of fees, including poorly disclosed fees, prepaid executives contend the industry's prices largely have fallen over the past few years.
"I have seen the fees drop over time," Laura Kelly, senior vice president for global product and marketing at American Express Co., said in an interview at SourceMedia's annual Card Forum payments conference earlier this month. SourceMedia publishes PaymentsSource.
"When I first got in the industry a fee of $10 a month was very common, and there were some cards that came with a purchase fee of $15 or $20. So that's definitely come down," she added.
Even some consumer advocates, who continue to push for better prepaid card disclosures and protections, acknowledge that some fees are being cut.
"For the most part, monthly fees are dropping. … [And] in some cases activation fees have disappeared," says Michelle Jun, a senior attorney with the Consumers Union and author of several annual reports comparing more than a dozen prepaid cards.
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