CFPB rule will protect consumers against unauthorized charges and help them avoid hidden fees
DES MOINES – Attorney General Tom Miller today joined a group of 19 state attorneys general in urging Congressional leaders to not allow Congress to block crucial impending protections for millions of consumers who use prepaid debit cards.
The 19 attorneys general, including Miller, sent a letter to U.S. House and Senate leaders urging them to oppose three resolutions before Congress, any of which would block implementation of a Consumer Financial Protection Bureau (CFPB) rule that will regulate the cards and provide consumers with certain protections. The rule is set to take effect next year on April 1.
“We think the CFPB rule is a balanced common sense approach to regulating prepaid debit cards in that that it allows the industry to thrive, yet also provides important and very much needed protections for consumers,” Miller said.
Prepaid cards are a rapidly growing market and are often used by consumers who have limited or no access to a traditional bank account. Today, more consumers receive their wages by prepaid cards than by paper checks.
Consumers frequently incur hidden or undisclosed fees, even when the cards are used to receive their salary or student loans. Although most consumers use these cards to avoid overdraft fees, some payday lenders who provide funds through these cards also subject consumers to overdraft fees.
The CFPB’s prepaid card rule provides a common-sense approach to regulating the cards, and provides consumers with protections found in similar financial products. Among other protections, the rule will:
- Protect prepaid card users against fraud and unauthorized charges
- Help consumers avoid hidden fees and enable them to comparison shop with a simple chart of common fees
- Provide convenient, free access to account transactions and account balances
- Require employers to inform employees they do not have to receive wages on a payroll card
- Require prepaid credit cards to comply with existing credit card laws (including an ability to pay analysis, limits on overdraft fees in the first year, and safeguards on how funds are repaid)
The resolutions to stop the CFPB from implementing the rule (S.J. Res.19, H.J Res. 62 and H.J. Res. 73) have been filed under the Congressional Review Act (CRA). A CRA vote blocking the rule would also bar the CFPB from enacting a substantially similar rule unless Congress authorizes it.