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In courting the underbanked, even smart innovations can be tripped up by regulations.
December 26 -
Urban Trust, a Florida bank, had been under fire from consumer groups for allowing a payday lender to load loans onto its prepaid debit cards.
September 25
Under pressure from consumer groups and regulators, Urban Trust Bank (UTB) of Lake Mary, Fla., has agreed to stop charging overdraft fees on its prepaid cards. Consumer advocates said the overdraft fees amounted to payday loans at rates exceeding state interest-rate caps.
Urban Trust's prepaid cards, sold at the outlets of payday lender CheckSmart, offered overdraft protection for a fee of 15 cents for every $1 in negative balance, a rate that exceeded the interest-rate caps in several states, including Arizona and Ohio.
The $566 million-asset bank stopped charging the fees on Friday. It said that it would continue to offer the cards, but without overdraft protection.
As part of an agreement with the Office of the Comptroller of the Currency, the bank had
"Urban Trust Bank did the right thing and rid its prepaid cards of overdraft fees," said Lauren Saunders, managing attorney at the National Consumer Law Center, one of the groups that asked the OCC to look into Urban trust, in a news release. "Prepaid cards should be just that: prepaid and not vehicles for evading state interest rate caps and payday laws."
Urban Trust issues the cards through Insight Card Services, a prepaid-card program manager that is part owned by Community Choice Financial, according to Saunders. Community Choice operates a chain of payday-loan stores under the CheckSmart, Buckeye and other brands. In May, two dozen consumer and community groups had
In November, the OCC's scrutiny of Urban Trust led to the
