Sen. Mark Warner (D-Va.), a member of the Senate Banking Committee, introduced legislation last week that would require banks to be more transparent in disclosing fees associated with the use of prepaid cards.
“At nearly $700 billion in sales each year, prepaid cards are one of the fastest growing parts of the financial industry,” Warner said. “However, these cards aren’t subject to the same kinds of consumer protections as other types of credit cards and gift cards. It’s important that young people and people without credit history or access to traditional banking tools have access to prepaid cards, but we can’t let the technology outpace smart consumer protections.”
A 2012 survey commissioned by MasterCard indicated that the prepaid sector—one of the fastest growing sectors of the financial services industry—will top $822 billion by 2017.
Prepaid cards resemble a standard credit card but do not offer the same protections as a traditional debit or credit card. Some cards carry activation fees, and many include monthly maintenance fees, as well as inactivity fees.
Warner’s Prepaid Card Disclosure Act would require the CFPB to issue rules that mandate disclosure of fees associated with prepaid cards in a visible, easily understood table.
The bill would also allow issuers to provide disclosure through a QR code or barcode and require a toll-free telephone number and website to be displayed on the card so consumers can access additional fee disclosure information.
“Greater transparency of fees in a consistent way will empower consumers to make more informed decisions before purchasing or using one of these prepaid products,” Warner said. “These reloadable cards are popular as gifts, and many parents send their children off to college with them. As they become more prevalent in our economy, it just makes sense that consumers should have access to the same information that we require with gift cards and most major credit cards.”