The Interviews - Experts Address Recent Fraud Headlines. This collection of interviews offers analysis of recent financial fraud events and cases.
Posted on 25th May 2012 @ 10:14 AM
Never a dull moment at the Consumer Financial Protection Bureau. On May 23, the newest regulator on the block issued an Advance Notice of Proposed Rulemaking (ANPR) seeking input on how to ensure that consumers’ funds on prepaid cards are safe and that card terms and fees are transparent.
“The people who use prepaid cards are, in many instances, the most vulnerable among us,” said CFPB Director Richard Cordray. “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. That’s why we are launching a rulemaking to promote safety and transparency in this emerging market.”
At the same time, the Bureau launched “Ask CFPB: Prepaid Cards”—a searchable online tool with easy-to-understand answers to more than 80 questions about prepaid cards.
The CFPB said its rulemaking will focus on “General Purpose Reloadable” prepaid cards. These cards allow consumers to load the cards with money upfront and use them as if they were checking account debit cards.
The CFPB noted that a 2009 FDIC study found that 9.7 percent of all households used GPR prepaid cards. Another report found that the prepaid market totals $57 billion and is expected to grow at a rate of 42 percent per year from 2010-2014. By 2014, the total dollar amount loaded onto prepaid cards is projected to hit $167 billion.
“Despite its growth, the prepaid market is still largely unregulated at the federal level,” the CFPB said. It highlighted the issues it plans to review. These include disclosure of fees and terms, the insurance status of cardholders’ funds, and consumers’ liability when their cards are used without their authorization.
The Bureau also published a factsheet on prepaid cards and held a field hearing on the subject in Durham, N.C.
“We are at a critical moment in the growth of the prepaid market,” CFPB Director Cordray said at the hearing. “At the Consumer Bureau, our job is to do all we can to ensure that financial products and services actually help consumers rather than harm them. We want good practices to be instilled early on so that as the market grows, it does so responsibly. Clear rules in the prepaid market will help prevent the spread of ‘low-road’ competition that hurts both consumers and the honest businesses that seek to serve them well.”
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