The head of the Consumer Financial Protection Bureau says that the prepaid card industry ought to get ready for new restrictions, because they are on the way.
“It’s going to come one way or the other,” Richard Cordray said on Tuesday.
“Prepaid cards are an odd new product and fall in the cracks. That’s very problematic because these products have exploded in recent years,” he added.
Sen. Robert Menendez (D-N.J.) has urged support for legislation putting new restrictions on prepaid cards, on which money can be electronically loaded. At a Senate Banking Committee hearing on Tuesday, he pressed Cordray on his agency's plans to regulate the market.
“It’s very important that we put in place regulations or legislation — either way — that make sure that consumers have the benefits of disclosures” and other measures, Cordray told him.
Unlike debit cards, which are tied to bank accounts, prepaid cards are largely unregulated at the federal level. They can be helpful to young people or those without bank accounts or used as gift cards.
Some labor and progressive groups have worried about excess hidden fees and high costs from the cards.
Last year, the CFPB took the first step to issue new regulations for prepaid cards. Earlier this year, the agency warned employers not to force their workers to use prepaid cards instead of paycheks to get their wages.