A recent survey revealed that while a vast majority of consumers support potential regulation for pre-paid cards, support fell significantly after consumers were told that the rules could result in higher fees.
“Credit cards have a lot of protection but prepaid cards have hardly any,” Charles Tran, the founder of credit card comparison site CreditDonkey.com, which conducted the survey, said, according to Consumer Affairs. “When we asked consumers if they supported regulations to add consumer protection from liability, most said yes. But when we asked if they were willing to pay higher fees in exchange for those new rules, that number dropped sharply.”
The survey found that 83.6 percent of consumers supported the idea of limited consumer liability for fraudulent prepaid card transactions. After being told that increased regulation could also increase costs, support for the measure fell to 51 percent.
Tran said that pre-paid card issuers will cite rising costs in increasing the fees associated with their cards.
“If there is $10 left on a card and the consumer loses it, the company would not only have to replace the $10 but have customer service in place that could process it,” Tran said, Consumer Affairs reports.
Prepaid cards are growing in popularity, and consumers are expected to load $167 billion onto prepaid cards by 2014. The cards have become a method of making purchases and paying bills without a checking account.
While 52 percent of consumers also indicated that they would support a proposed rule to allow stay-at-home spouses and partners to more easily obtain credit cards, support for the proposal fell to 30 percent after consumers were told they would pay higher fees or interest rates, according to Consumer Affairs.
The CFPB is currently in the process of collecting consumer input about the effects of the 2009 CARD Act, which implemented a number of credit card reforms. The agency said that earlier research found that the legislation had largely eliminated the practice of raising interest rates on existing cardholders, a typical practice before the law took effect, and that the CARD Act had also resulted in lower late fees and over-limit fees.
Additionally, the CFPB announced last year that it would add several new consumer protections to cover the prepaid market but has not yet issued final rules, Consumer Affairs reports.