The window of opportunity to get away with questionable fees on reloadable prepaid cards may be narrowing.
The Center for Financial Services Innovation on March 13 unveiled a proposed fee-disclosure box designed to make it easier for consumers to compare basic prepaid card fees as part of its campaign to shine a broader light into industry fees.
The box aims to replace prepaid card jargon such as “point-of sale cash” with simpler language such as “get cash back at the store,” David Newville, policy manager for the Chicago-based organization, tells PaymentsSource.
“We want to make it easy for consumers to compare the fees for various prepaid card services when they are looking at the product in a store, with the disclosure box available on the product’s packaging or on a separate, available sheet,” he says.
The organization made its announcement on the eve of a hearing slated for March 15 before the Senate Banking Committee, where various industry representatives plan to testify about prepaid card issues.
Sherrod Brown, D-Ohio, is holding a hearing March 14 during which representatives of the National Consumer Law Center also will testify about prepaid cards on issues that include enhanced disclosure, better security, and restrictions on fees.
Although the timing was somewhat coincidental, the Chicago organization has been working for more than a year to develop the disclosure box, which three prepaid card issuers already have agreed to voluntarily adopt. Green Dot Corp., Plastyc Inc. and Ready Credit Corp. are among the first to test it, and others will likely follow suit, Newville says.
Acknowledging that many prepaid card issuers already provide clear disclosure of prepaid debit card fees, the organization launched its disclosure effort “because we wanted to find a way to standardize the way fees are described,” Newville says. “Even experts in this industry can find it confusing to compare one prepaid card product with another.”
The proposed disclosure box lists 14 different fees and is designed to compare fees across various categories, such as the fees for opening an account, loading funds, withdrawing funds and checking balances.
The organization views its proposed disclosure box as “a test-and-learn” process, Newville says.
“We will continue to gather feedback from card issuers and others to see what works best as we develop a disclosure box we hope will be as clear and useful as the Schumer box that has been used for a long time in the credit card industry.”
The organization also hopes the work it is doing on the proposed disclosure box will speed efforts by the Consumer Financial Protection Bureau to bring prepaid cards into its regulatory purview.
“We will be sharing our findings (surrounding the disclosure box) with the bureau, and when they inevitably take action on prepaid cards, we’d like to see them mandate a fee-disclosure box along these lines,” Newville says.
The bureau so far has not indicated its plans to announce regulations for prepaid cards, but he expects it to do so eventually.
“We realize the regulatory process will take a couple of years, with proposals and gathering comments and writing rules, but there is no reason the industry can’t start now to follow some reasonable guidelines.”
