Prepaid credit cards used instead of a checking or debit account may seem like a great idea. But hefty fees, in some cases, can eat into the money you load on to your card. The Consumer Financial Protection Bureauwants to set up new rules to regulate fees and other practices of prepaid card programs.
“The people who use prepaid cards are, in many instances, the most vulnerable among us. All consumers need, and deserve, products which are safe and whose costs and risks are clear up front,” said Consumer Protection Bureau Director Richard Cordray. Consumer Advocates worry that celebrity endorsements lure some to sign up for the cards. The CFPB points out that the Kardashian sisters, baseball player Alex Rodriquez and characters from the Twilight movie pitched for prepaid cards. And CFPB Director Cordray says , “This kind of celebrity marketing can be an unhelpful distraction to consumers who don’t know how the card works…”
In addition there’s concern that some providers steer low-income consumers toward prepaid cards rather than offering lower cost checking accounts. The CFPB wants to regulate the cards now because an increasing number of consumers are signing up for them. 7 million consumers use the cards and the Mercator Advisory Group projects the amount loaded on to prepaid cards will reach $167 billion dollars by 2014.
No changes right away. The CFPB is getting input to shape new regulations and if you have something to say, the bureau wants to hear from you.