Thursday, November 13, 2014
Consumers Union Urges Financial Watchdog to Adopt Additional Safeguards
WASHINGTON, D.C. – The Consumer Financial Protection Bureau (CFPB) is proposing new rules today governing prepaid cards that will help ensure consumers are treated more fairly and get a good value, according to Consumers Union, the policy and advocacy division of Consumer Reports. But the consumer group is calling on the CFPB to strengthen its proposal by adopting additional safeguards to better protect consumers.
“It’s time for consumer protections to catch up with this fast growing new way to pay,” said Christina Tetreault, staff attorney for Consumers Union. “The CFPB has proposed some important new safeguards that will make a real difference for consumers. But there’s more work to be done to ensure consumers get the protections they deserve when they rely on prepaid cards.”
The CFPB’s proposed new rules come on the heels of a new Consumer Reports investigation that found that some prepaid cards come with costly fees that aren’t always disclosed clearly and that prepaid cards still lack the same legal protections consumers get with prepaid cards.
Under the CFPB’s proposal, prepaid card issuers will be required to provide consumers with clear and simple disclosures of the fees they’ll be charged so they know how much they’ll pay before purchasing a card. In addition, the CFPB is proposing new rules to make it easier for consumers to check their account records and dispute errors. Under the proposal, a consumer’s financial liability for fraudulent or erroneous charges on their cards would be capped at $50 as long as they report them in a timely manner. Consumers already receive this protection for credit and debit card transactions.
Consumers Union had urged the CFPB to require prepaid card issuers to provide FDIC insurance with their cards. Instead the CFPB proposed that card issuers simply disclose that their cards don’t provide FDIC insurance. Consumers Union also called on the CFPB to prohibit overdraft fees on prepaid cards but the financial watchdog’s proposal falls short of doing so.
“More and more consumers are relying on prepaid cards to make purchases and manage their money,” said Pamela Banks, senior counsel for Consumers Union. “We hope the CFPB will strengthen its proposal by adopting these other critical reforms.”
Contact: Michael McCauley, mmccauley at consumer.org, 415-902-9537 (cell) 415-431-6747, ext 126 (office) or David Butler, dbutler at consumer.org, 202-462-6262