Prepaid debit card: new disclosure on fees
| WASHINGTON
Three major issuers of聽prepaid聽debit聽cards said Tuesday they will test a new fee-disclosure box designed to help people understand the costs of using cards to access their money.
The disclosure box, designed by a non-profit group focused on people who don't have bank accounts, aims to improve the transparency of the increasingly popular cards.聽Prepaid聽cards are similar to聽debit聽cards but are not attached to an underlying checking account.
The Center for Financial Services Innovation also called on regulators to improve disclosures and other consumer protections for聽prepaid聽card users.
"Consumers need to be able to easily determine the true cost of a聽prepaid聽card and compare different products before deciding which to purchase," said David Newville, CFSI's policy manager, in a statement. He said a standardized disclosure "will ultimately attract more consumers to聽prepaid聽cards."
CFSI is funded in part by banks and other financial companies that sell financial products and services to people who don't have bank accounts.
The companies testing the fee disclosure are Green Dot Corp., Plastyc Inc. and Ready Credit Corp. Green Dot, the biggest publicly traded issuer of聽prepaid聽cards, said it will add the box to its card package this fall.
"Consumers should not have to worry about surprise fees hidden deep within cardholder agreements," Green Dot CEO Steve Streit said in a statement.
Prepaid聽cards have been criticized by consumer advocates because some of them carry higher fees that what banks charge for comparable services. However, research funded by the聽prepaid聽card industry has found that prepaid debit card users often pay less than people who have checking accounts with low balances.
Prepaid聽cards are regulated separately from聽debit聽cards. They do not always offer the same protections against fraud and theft that credit and聽debit聽cards do.
The Consumer Financial Protection Bureau has the authority to write rules governing聽prepaid聽cards. The agency, created under the 2010 overhaul of financial rules, regulates broad categories of consumer financial products and services.
The bureau is considering adding聽prepaid聽card companies to the list of industries that it can monitor and supervise on-site, according to a public notice published last year.
In its release, CFSI called on the bureau to "do consumer testing of聽prepaid聽disclosures."
A bureau spokeswoman declined to comment on the proposed fee disclosure or on any agency plans involvingprepaid聽cards.
CFSI president and CEO Jennifer Tescher is set to testify Wednesday at a Senate subcommittee hearing aboutprepaid聽cards.
