The Dodd-Frank Act loophole that exempted general prepaid reloadable cards from fee controls could be closing in the not too distant future.
The Consumer Financial Protection Bureau yesterday announced it will release an Advance Notice of Proposed Rulemaking (ANPR) pertaining to the nation's growing prepaid card market.
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He described a general prepaid reloadable card market that was growing "by leaps and bounds at an expected rate, we're told, of over 40 percent each year from 2010 to 2014."
Cordray said that the manager of the largest prepaid program in the U.S. had told him that the number of prepaid users had more than doubled in three years from 3.4 million active cardholders to more than 7 million.
"All of these consumers need and deserve products that are safe and whose costs and risks are clear upfront. Yet right now, prepaid cards have far fewer consumer protections than bank accounts or debit cards or credit cards, Cordray said.
"We have a duty to make sure that these products are safe for consumers and that prepaid card managers do not make money by relying on trips and traps that are unsustainable for cardholders," he added.
Cordray said the CFPB would initiate a rulemaking process to address prepaid cards — particularly in the areas of safety and transparency. "[T]hese are and should be important hallmarks of all consumer financial products and services. As part of our rulemaking, we will explore how best to extend these basic protections to prepaid cardholders whose funds may be at risk."
The public is invited to submit comments on a number of points outlined in the CFPB's Advance Notice of Proposed Rulemaking. The comment period will last for 60 days following the ANPR's publication in the Federal Register.
In addition to the ANPR, Cordray also announced the launch of a new interactive online tool, "Ask CFPB: Prepaid Cards." The service will provide answers to more than 80 consumer FAQs, that Cordray said will give an overview of prepaids and address consumers' questions about obtaining, reloading, and using prepaid cards.
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