The Consumer Financial Protection Bureau recently announced on that new rules will be enacted next year to defend the rights of people who use prepaid debit cards.
A variety of financial options are covered in the 1,700 page document outlining the new rules, including mobile wallets and person-to-person payment sites like Google Wallet and PayPal, as well as Social Security payments.
Prepaid cards accounted for an estimated $65 billion in 2012, which is more than twice the amount used by prepaid cards in 2009. That figure is expected to double again by the year 2018.
“The biggest deal is that this rule prevents consumers from incurring overdraft fees,” Thaddeus King, an officer for the consumer banking project at The Pew Charitable Trusts, said in a statement. “The reason most people turn to prepaid cards is to avoid debt and overdraft fees. For the past few years, there haven’t been any federal regulations on this subject.”
Most of the people who use prepaid debit cards are low-income workers and young people who have little experience dealing with financial matters. Among the new set of rules is a stipulation about being upfront about fees and costs of using prepaid card retailers, like monthly fees and extra charges for withdrawing money at an ATM.
The regulations will also protect consumers with limited liability for a lost or stolen card, holding them responsible for up to $50, as long as the card is reported within two days.
“Before today … many of these products lacked strong consumer protections under federal law. Our new rule closes loopholes and protects prepaid consumers when they swipe their card, shop online, or scan their smartphone,” said Richard Cordray, director of the Consumer Financial Protection Bureau.
“Though many prepaid companies already offer some of these same protections to their consumers, it is vital for consumers to have assurance that these protections are now the law of the land,” Cordray concluded.