New protections for prepaid accounts

Monday, April 01, 2019

The Consumer Financial Protection Bureau (CFPB) has issued new standards to protect prepaid card customers that go into effect today. The new rule includes protections for prepaid cards, payroll cards, government benefit cards, and certain mobile and online person-to-person payment services.

Protection from unauthorized charges and errors.  Companies must investigate, correct errors and reimburse consumers for unauthorized charges, the same way they must do with a debit card. Consumers must report the error, loss or theft within two business days of learning of the problem.

The protections cover all “prepaid accounts,” including physical plastic cards and funds in newer types of mobile or internet-based accounts. Protection against unauthorized charges begins immediately after purchase, once the consumer registers the card with the prepaid card provider.

Key fees will be disclosed on the card’s package. Clear uniform fee charts will be included on the package so consumers can avoid hidden fees and comparison shop. 

A warning if card is not FDIC insured. Most prepaid accounts have FDIC insurance, but those that do not must notify consumers on the outside of the package.

Basic account information must be free. Balances must be available by telephone without charge. Transaction information going back 12 months must be available online for free. Information for the previous 24 months may be requested up to once per month without charge. Issuers may charge for regular monthly paper statements.

Employers must give employees a choice. Employers and government agencies cannot require consumers to receive wages or benefits in a particular account. Payroll cards must also come with a clear fee disclosure and a statement: “You do not have to accept this payroll card. Ask your employer about other ways to receive your wages.”

Limits on overdraft fees and features. Cards that have overdraft features must disclose that information on the package. If the issuer allows the account to be overdrawn and charges a fee for overdrafts, the creditor must determine that the consumer is able to repay the overdraft credit. Fees in the first year are limited to 25 percent of the credit line, but there is no limit on the interest rate. Payments may be due no more frequently than once a month, 21 days after a statement is issued (which may be electronic). The creditor cannot require automatic repayments, but consumers may choose to pay automatically.

Public access to account agreements and fee schedules. Companies that offer prepaid cards to the general public must post terms and fee information online and the information must be easy to find.

 

For more information on the CFPB’s prepaid rule, please visit the CFPB website.