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Prepaid debit cards may get new rules. How they could affect you.

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Gene J. Puskar/AP/File

(Read caption) A person inserts a debit card into an ATM machine in Pittsburgh. Prepaid debit cards may soon get new regulations from the Consumer Financial Protection Bureau.

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If you use a prepaid debit card, here’s a heads up: Your plastic may soon come under new rules from the Consumer Financial Protection Bureau, which is expected to release a proposal Nov. 13, according to recent reports.

Regulations may affect overdrafts and require clearer disclosures from card issuers regarding what it costs you to use their products, according to reports from Bloomberg News and the Wall Street Journal. Consumer use of prepaid debit cards that can be reloaded with funds ballooned from virtually zero 10 years ago to 7.5% of all payments in the U.S. in 2012, according to Moebs Services, a researcher in Lake Bluff, Illinois. Reloadable cards are particularly popular with younger Americans, studies show.

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The consumer bureau said the number of prepaid cards in use doubled to more than 7 million this year from 3.4 million in 2009, just counting those handled by the two largest program managers. The agency tipped its hand in May with an announcement that it would take a close look at fees, terms and the security provided for users’ funds on prepaid cards. It cited concerns about the fees charged by the “largely unregulated” industry and the consumers it serves.

“The people who use prepaid cards are, in many instances, the most vulnerable among us,” said Richard Cordray, the bureau’s director, in the May announcement. “All consumers need, and deserve, products which are safe and whose costs and risks are clear upfront. Yet right now prepaid cards have far fewer regulatory protections than bank accounts or debit or credit cards.”

What’s expected

Among the proposals expected from the agency are a disclosure format designed to make it easier for you to compare charges and services offered by different card issuers, the Journal said in a Nov. 11 report. It said the rules would also deter overdrafting, though it didn’t say how that might be accomplished, as it noted the bureau lacks the authority to cap fees.

To control overdraft costs, the regulator plans to apply a 2009 credit card reform law to the prepaid industry’s products, Bloomberg News said in October. It said only a few issuers permit overdrafting with their cards. The news service also said the proposals wouldn’t include limits on transaction fees.

In May, the agency listed standardized disclosure that would make it easier to compare different cards’ costs and services among the areas it planned to evaluate. It also cited the way issuers let you know whether your funds are insured against losses, your liability for unauthorized charges and overdraft policies.