Author: Mark Greenblatt / Source: WGBA
WASHINGTON, D.C. – Major consumer protections slated to take effect next spring for users of prepaid credit cards would go away if a push succeeds to have Congress kill the safeguards before a deadline early next month.
Scripps News has discovered the president-elect of the largest trade group vying to block the protections, which require increased transparency across the industry, also leads a prepaid company that agreed in March to a $53 million settlement with the Federal Trade Commission after the government charged that it repeatedly deceived consumers.
National consumer advocates say the revelations about the leadership of the Electronic Transactions Association, which represents 550 members of the prepaid industry, only adds to the need for more industrywide protections.
Currently, prepaid cards are not required to carry the same fraud protections as standard credit or debit cards and can come packed with hidden fees that can quickly reduce available funds. A new rule finalized by the Consumer Financial Protection Bureau last October sets an industrywide standard on fee disclosures for prepaid cards and requires new, transparent postings right on the package listing the fees the CFPB believes are most important to consumers. The rule would also strengthen fraud protections for consumers.
“It would really be a tragedy to deprive 33 million households of fraud protection and simple fee disclosures,” said Lauren Saunders, associate director of the National Consumer Law Center, which is trying to fight resolutions introduced in the House and Senate that would do away with the CFPB rule. The resolutions would exercise a rarely used procedure under the Congressional Review Act that can do away with regulations passed in the final months of a prior administration. Congress has until May 10 to act on Obama-era rules.
Consumer advocates say the industry needs more safeguards because prepaid cards are now one of the fastest growing consumer financial products in the nation. The amounts being loaded onto them have exploded in recent years, growing from $52 billion in 2007 to $287 billion by 2015, according to the Mercator Advisory Group. The numbers collected so far for 2016 reach almost $300 billion. Large employers and government agencies like the Social Security Administration use the cards to pay employees or make benefit payments.
Prepaid cards, which are reloadable, are different from gift cards and add many debit card-like features without tying them to a bank account.
The largest player and one of the prepaid industry’s founders, Green Dot, welcomed the CFPB rule when it was announced…
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