A mobile card reader that can detect and seize prepaid card balances is now available to law enforcement agencies, according to an article in the industry publication Homeland Security Today.
The ERAD Prepaid Card Reader is a handheld device using wireless connectivity to allow law enforcement officers in the field to check the balance of cards, allowing for “identification of suspicious prepaid cards and the ability to put a temporary hold on the linked funds until a full investigation can be completed,” S&T said in an announcement.
Read the article here:
Mobile card readers/seizure devices were first discussed in connection with a Financial Crimes Enforcement Network Rule that treats prepaid cards as a ‘monetary instrument’ like cash and would report prepaid card holders to report any balance over $10,000. This was criticized by the prepaid industry as ineffective and unfair.
It is also important to remember that consumers who travel with credit or debit cards have no obligation to report their bank account balances or the size of their credit lines. In fact, such information is strictly protected from government scrutiny under the Right to Financial Privacy Act. Certainly consumers who rely on prepaid cards to access financial services should be entitled to the same rights. Additionally, a comparison of bank debit cards and GPR prepaid cards indicates that, from a functional perspective, there is little basis to impose disparate treatment on prepaid cardholders.
Read the critique here:
The NBPCA Published an in depth white paper here:
The Homeland Security Article suggests that the readers can also gain information from credit and debit cards. No court challenges have been filed yet around the readers, but it may be arguable that this is a violation of the Right to Financial Privacy Act or even the Fourth Amendment. There is a question of whether or not it is equitable for prepaid cardholders to be treated differently from debit and credit cardholders and have their funds seized instantly.
Despite being hailed as a wonderful new tool for law enforcement, questions remain, and will likely be brought into court as these devices become more widespread.
Overview by Ben Jackson, Director, Prepaid Advisory Service at Mercator Advisory Service