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The Consumer Financial Protection Bureau is announcing plans to develop the first-ever federal standards for reloadable prepaid cards, which look like debit cards, often sporting a Visa Inc or MasterCard Inc logo.
Companies began offering reloadable prepaid cards in the 1990s. Use of the cards has grown quickly in recent years but the products aren't currently subject to consumer protection rules like credit and debit cards.
The consumer bureau wants to set a standard for how card issuers disclose fees, which critics complain are much too high and often confusing. Prepaid cardholders may face fees when they check balances, get statements or speak to a service representative. In addition, they can pay for card activation, plus monthly fee for card usage and each time they get cash from an ATM, according to a recent Consumers Union survey.
The bureau is also considering requiring firms to tell consumers whether or not their funds are insured by the Federal Deposit Insurance Corp, which would protect cardholders if the issuer were to fail. Cash in a bank account is insured by the FDIC, but that's not true across the board for prepaid cards.
The bureau also wants to require prepaid card-issuers to limit consumers' liability when their cards are used without their authorisation. While many prepaid card companies voluntarily offer that protection, it is not yet a requirement.
The bureau will accept feedback on its plans through July 22, and release a formal proposal early next year.
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