A new report from the Consumers Union calls on the Consumer Financial Protection Bureau to impose new regulations on prepaid cards based on an analysis of fees and disclosures.
Consumers Union is urging the Consumer Financial Protection Bureau to require prepaid card issuers to improve fee disclosure and abide by the same mandatory protections consumers are guaranteed by law when using debit cards linked to their bank accounts.
Transparency, especially around fees, only can help the industry because the more customers know, the more comfortable they feel with the product and the more likely they are to use prepaid cards and commit money to them. However, the Consumers Union spends a long time discussing the fees charged by prepaid cards in its press release, and fails to note that even bank accounts often charge fees at nearly the same level. A Bank of America eBanking account holder would be charged $8.95 a month if they want a paper statement or visit a teller. Someone with My Access Checking who does not have direct deposits of at least $250 each statement period or maintain an average balance of $1,500 will pay $12 per month. Wells Fargo and other large banks are charging or testing similar types of fees.
The issue for prepaid cards is whether or not they are sustainable. Unlike banks, prepaid card program managers only make money from fees and interchange, while banks have a host of other revenue generating parts of their business. As we consider prepaid cards in context, it is necessary to move beyond just a comparison to vague notion of ‘free checking’ and consider what alternatives are truly available to those who use prepaid cards.
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