Maybe you, like millions of other consumers in the United States, are using prepaid debit cards more frequently now than in the past. What you might not know is that some in Congress are playing politics with crucial rules meant to protect your wallet, and many of us whose job it is to look out for consumers want Congress to stop.
Consumers use these cards for lots of reasons. Some use them to help stick to a budget, others cannot gain access to credit cards, many college students now receive federal aid on prepaid cards, and some employers now pay workers using these cards. Prepaid debit cards have exploded in popularity in recent years, with the annual amount of money loaded onto them growing from $1 billion in 2003 to $65 billion in 2012 — a figure expected to reach $112 billion by 2018. According to the FDIC, 9.8% of all U.S. households used prepaid cards in 2015.
Beyond these difficulties, the predatory payday lending industry has now seized on prepaid debit cards as another tool. Payday lenders already charge extremely high interest rates; now they are also able to charge their borrowers overdraft fees without adequate disclosure.
As attorney general for the District of Columbia, I have prioritized protecting consumers from fraud, scams, and unfair business practices, and have worked with my counterparts across the country to fight these types of abuses. I applauded the Consumer Financial Protection Bureau (CFPB) when it, after years of examination and public comment, announced protections for prepaid debit card users in line with existing protections for checking accounts and credit cards.
The CFPB’s new rules would provide common-sense solutions to protect vulnerable consumers. These include limiting losses when cards are lost or stolen, requiring card issuers to investigate and resolve billing errors, and ensuring consumers can access their account information for free. These proposed rules would make fees associated with prepaid cards more transparent and limit the abusive use of overdraft fees. They are designed to combat abuses that arise when these cards are used by outliers in the prepaid card marketplace, such as payday lenders.
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