Prepaid Card Rule

The rule improves fee transparency, provides basic protections against fraud, unauthorized charges and errors, and limits overdraft fees for prepaid cards.

H.J. Res. 62 is sponsored by U.S. Rep. Tom Graves (R-Ga.).
S. J. Res. 19 sponsored by U.S. Sen. David Perdue (R-Ga.).

OVERVIEW

Consumers who use prepaid cards to make purchases and manage their money get important protections under the final prepaid card rule issued by the U.S. Consumer Financial Protection Bureau. The final rule:

  • Protects prepaid card users against fraud and unauthorized charges;
  • Helps consumers comparison shop with a simple chart of fees on the outside of the package, with more details on a longer chart on websites and inside the package at retail;
  • Requires that hybrid credit-prepaid cards that access credit features through overdrafts must comply with credit card laws, including ability to pay, limits on overdraft fees in the first year, and rules giving consumers time and control over how to repay; and
  • Ensures that consumers have convenient, free access to account information by providing free access to statements upon request and free balance information by telephone.

As a result of the rule, consumers will be able to compare cards more easily to find the most affordable option and have the peace of mind that their money will be safe if their card is lost or stolen.

IMPACTS

Prepaid cards are a rapidly growing market, used by 9.8 percent of households in 2015 according to the FDIC. Prepaid cards can be used much like a traditional debit card linked to a bank account, but no bank account is required. Prepaid cards are often marketed to consumers who cannot get, have trouble with or choose not to have a traditional bank account.

These products were once considered second-tier bank account substitutes, as they had little or no protection against fraud and loss, and charged high, multiple fees, including fees for basic services such as getting account information. The CFPB’s prepaid card rule closes the gap in protections between bank account debit cards and prepaid cards, which is especially important to low-income and younger consumers, groups that use prepaid cards in higher numbers.

OPPONENTS

While many prepaid card issuers have voiced support for the new prepaid card rules, NetSpend, the only major card with overdraft fees, has opposed the rules. If repealed, the rule would allow NetSpend to keep charging customers $80 million or more in overdraft and other fees.

TAKE ACTION

Tell Congress Not to Block the CFPB’s Prepaid Card Rule!
This petition is hosted by the National Consumer Law Center.

CONTACTS

Lauren Saunders, National Consumer Law Center, lsaunders@nclc.org, (202) 595-7845

Michael McCauley, Consumers Union, mmccauley@consumer.org, (415) 431-6747, ext. 7606

NEWS AND RESOURCES

First Prepaid Cards, Then the Rest of Your Wallet
Center for American Progress: February 23, 2017

Sen. Lee Wants Prepaid Credit Card Regulations Stripped
KUTV: February 9, 2017

Millions at stake for Ga. Company in Fight Over Regulation of Prepaid Cards
AJC.com: February 9, 2017

Republicans Are Moving to Get Rid of Rules That Limit Overdraft Fees
Buzzfeed: February 8, 2017

Attack on Commonsense Rules for Prepaid Cards
Americans for Financial Reform: February 6, 2017

Senate Republicans Aim to Gut Debit-Card Safeguards
CBS News: February 3, 2017

Congress Trying To Roll Back Consumer Protections For Prepaid Cards
Consumerist: February 3, 2017

Congress Poised to Block Fraud Protections to Preserve Prepaid Card Overdraft Fees
National Consumer Law Center: February 2, 2017

CFPB Orders Mastercard and UniRush to Pay $13 Million for RushCard Breakdowns That Cut Off Consumers’ Access to Funds
Consumer Financial Protection Bureau: February 1, 2017

FTC Charges Prepaid Card Company Deceptively Marketed Reloadable Debit Card
Federal Trade Commission: November 10, 2016

NetSpend Plans Evasions of CFPB Prepaid Rules to Preserve $80 Million in Overdraft Fees
National Consumer Law Center: October 28, 2016

CFPB Finalizes Strong Federal Protections for Prepaid Account Consumers
Consumer Financial Protection Bureau: October 5, 2016

Text of the Prepaid Card Rule
Consumer Financial Protection Bureau: October 5, 2016

Rating State Government Payroll Cards
National Consumer Law Center: November 5, 2015

Payday Lender Prepaid Cards: Overdraft and Junk Fees Hit Cash-Strapped Families Coming and Going
National Consumer Law Center: July 15, 2015

Prepaid Cards: How They Rate 2014
Consumers Union: November 2014

Prepaid Cards: How They Rate on Value, Convenience, Safety and Fee Accessibility and Clarity
Consumers Union: July 2013

Prepaid Cards: Loaded With Fees, Weak on Protections
Consumers Union: March 2012

Adding It All Up: How Prepaid Cards Fees Compare to Checking Account Fees
Consumers Union: April 2011

Prepaid Cards: Second-Tier Bank Account Substitutes
Consumers Union, Consumer Federation of America and the National Consumer Law Center: September 2010