Protection For PrePaid Card Users

If you use prepaid cards instead of a checking account, you’ll applaud the latest move by the Consumer Financial Protection Bureau (CFPB). It plans to institute federal protections for prepaid card users similar to those that cover people who rely on checking accounts

Prepaid card use exploded from $1 billion in 2003 to nearly $65 billion in 2012, and CFPB projections indicate consumers will load nearly $100 billion on these cards by the end of 2014.

So it makes sense to offer protections already in place for checking accounts and credit cards.


1. Easy and free access to account information

The CFPB proposal would require financial institutions to either provide periodic statements or make account information easily accessible online and for free.

Unlike checking account customers, prepaid users typically do not automatically receive statements. The proposal would ensure that consumers are able see their account balances and a history of their transactions and fees.

2. Resolve Errors

When a consumer finds an error, new rules would require the financial institutions to work with them.

Now prepaid customers who get double-charged for a transaction, or get charged an incorrect amount, find it difficult to fix the problem. This proposal would require financial institutions to investigate errors that consumers report and resolve them in a timely way.

3. Protection Against Fraud and Loss

The proposal would protect consumers against unauthorized, erroneous, or fraudulent withdrawals or purchases.  The rules would limit consumers’ responsibility for transactions they did not authorize and create a timely method for them to get their money back. Customers’ liability would be capped at $50 if they notify the financial institution as soon as they discover the loss.

Know Before You Owe Disclosure

The Bureau’s proposal also includes new information to provide consumers with disclosures about fees and the costs of using the card.

Credit Protections

The CFPB proposals protect consumers who use a prepaid card like a credit card. They would be entitled to the same protections that credit card users have.

1. Ability to pay

New rules would require prepaid companies to make sure consumers have the ability to repay the debt before offering credit.

2. Regular Statements

Prepaid companies would have to give customers the same monthly periodic statement that credit card customers receive.

3. Reasonable time to pay and limits on late fees

Customers would have at least 21 days to repay their debt before they are charged a late fee, just like credit card customers. And the companies would need to lay out a schedule of late payment fees.

4. Limited fee and interest charges

Total fees could not exceed 25 percent of the credit limit during the first year. Card issuers generally are prohibited from increasing the interest rate on an existing balance unless the cardholder has missed two consecutive payments.

5. Thirty-day waiting period

Consumers would have to wait 30 days after getting a prepaid card before a company could offer them credit.

These proposals won’t go into effect for 90 days and in the meantime anyone who objects can let the CFPB know.

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Barbara Nevins Taylor

As the winner of 22 Emmy Awards and a slew of journalism honors and awards, I created to give you the straight story about complicated stuff. Tell us what you want to know and we'll get you the answers.