CFPB Issues Safety Regulations for Prepaid Debit Cards

What rights to do you have if you lose a prepaid debit card? Can you get a refund? Can you keep someone else from using it? New CFPB regulations provide increased transparency and protection.

Black Friday kicked off the 2016 buying season. In between the knit scarf and the video games on your list there is likely someone who will receive a prepaid gift card. But did you ever think about whether giving plastic is safer than a check?

Experts have called the rules around prepaid debit cards the “Wild West.” With no clear regulations, issuers were able to avoid a variety of disclosures and consumer protections associated with traditional debit or credit cards. When you give a prepaid debit card as a gift, you may be signing the recipient up for costs and fees on everything from balance inquiries to ATM withdrawals.

CFPB Regulations Police the Wild West of Prepaid Debit Cards

That’s why the Consumer Financial Protection Bureau (CFPB) has issued new final rules applying to prepaid accounts. They apply to all prepaid accounts, including payroll cards, government benefit accounts, and one-time use and refillable debit cards, as long as they are usable at multiple, unaffiliated merchants or can be used at ATMs. The rules do not apply to traditional gift cards.

Companies that issue prepaid cards will have almost a year to create the infrastructure and support systems necessary to protect consumers. Most of the regulations won’t kick in until October 1, 2017.

 

CFPB Notice Requirements

The new rules require card issuers to provide a variety of notices to consumers. Before purchasing or signing up for a prepaid account, a customer will be given information on:

• Purchase price or activation fees
• Standardized fees
• Occasional or service-related fees
• Availability of FDIC, NCUA or overdraft protections
• Availability of alternative wage or benefit payment options

Access to Prepaid Account Information

Under the new rules, prepaid account holders must also be provided access to information about their accounts. This added level of transparency will ensure that consumers are no longer forced to pay fees just to find out their balance. The rules will also require account issuers to make account agreements available to the general public on their websites or upon request.

 

Error Protection Against Identity Theft

Prepaid account holders will also be entitled to some error resolution solutions. However, they may need to verify their accounts to get provisional credit to cover unauthorized charges.

The CFPB rules on prepaid credit cards will help to tame the Wild West and make sure the thousands of users who rely on prepaid accounts every year know what they’re signing up for.

Dani K. Liblang is a consumer protection attorney at The Liblang Law Firm, P.C., in Birmingham, Michigan. If you are being harassed by creditors, contact The Liblang Law Firm, P.C., today for a free consultation.