Consumer groups want the Consumer Financial Protection Bureau to force prepaid card issuers to provide prepaid cardholders with the same protections as debit cardholders.
"As the cost of bank accounts continue to rise, more and more consumers are turning to prepaid cards as an alternative," Michelle Jun, a senior attorney for Consumers Union, said. "But prepaid cards offer weaker protections than bank accounts and can be loaded with hidden fees that make them costly to use. Prepaid card issuers should be required to provide consumers with the same mandatory protections that come with traditional debit cards and to clearly disclose all fees so consumers know these costs up front."
Currently, prepaid cardholders are limited to voluntary protections from their card issuers that only protect them if their cards are lost or stolen or have unauthorized charges.
Consumers who depend on prepaid cards say the voluntary protections come with loopholes and complain that prepaid card issuers do not properly disclose certain fees.
Several consumer groups recently wrote the CFPB with recommendations for action. These recommendations include requiring a cap on how much money consumers can lose when using the voluntary protection services. The groups also called for a guarantee that missing money will be re-credited within 10 business days after it is reported missing.
The letter was signed by the Consumers Union, the Center for Public Policy Priorities, the Center for Responsible Lending, the Coalition of Religious Communities, the National Consumer Law Center, the SC Appleseed Legal Justice Center and the U.S. PIRG.