Prepaid debit card: new disclosure on fees
Prepaid debit card from three major issuers will now come with specific disclosures on fees. The disclosure 'box' being tested aims to help users understand costs of using a prepaid debit card.
Three major issuers ofÂ prepaidÂ debitÂ 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.Â PrepaidÂ cards are similar toÂ debitÂ 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 forÂ prepaidÂ card users.
"Consumers need to be able to easily determine the true cost of aÂ prepaidÂ 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 toÂ prepaidÂ 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 ofÂ prepaidÂ 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.
PrepaidÂ 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 theÂ prepaidÂ card industry has found that prepaid debit card users often pay less than people who have checking accounts with low balances.
PrepaidÂ cards are regulated separately fromÂ debitÂ cards. They do not always offer the same protections against fraud and theft that credit andÂ debitÂ cards do.
The Consumer Financial Protection Bureau has the authority to write rules governingÂ prepaidÂ cards. The agency, created under the 2010 overhaul of financial rules, regulates broad categories of consumer financial products and services.
The bureau is considering addingÂ prepaidÂ 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 ofÂ prepaidÂ disclosures."
A bureau spokeswoman declined to comment on the proposed fee disclosure or on any agency plans involvingprepaidÂ cards.
CFSI president and CEO Jennifer Tescher is set to testify Wednesday at a Senate subcommittee hearing aboutprepaidÂ cards.