Washington - As consumers flock to retailers during the holiday season and as the use of prepaid debit cards continues to expand rapidly, Senators Robert Menendez (D-NJ) today introduced new legislation to curb hidden fees associated with many of these cards. Co-sponsored by Senators Richard Durbin (D-IL) and Jeff Merkley (D-OR), the Prepaid Card Consumer Protection Act will eliminate some of the most egregious hidden fees, increase fee transparency for consumers and increase consumer protections.
This effort comes at a time when the usage of and reliance on prepaid cards is booming. According to an analysis by Mercator Advisory Group, the amount loaded onto "open loop" prepaid cards will increase 383 percent between 2009 and 2012, from $60.4 billion to $233.8 billion.
"This holiday season, the weather outside isn't the only thing frightful for shoppers," said Menendez. "Responsible consumers are finding out the hard way that the purchasing power of many prepaid cards, is often much less than the dollar amount they loaded onto them. We need to ensure that families who rely on prepaid cards are not surprised by hidden fees and are not hit with fees that are totally unnecessary."
"Earlier this year, we began to rein in the abusive fees prepaid cards often charge consumers by ending overdraft fees and fees charged for the first monthly ATM withdrawal," Durbin said. "These changes, however, are just the first step. Today's legislation builds on the changes we've already begun to make and creates a new framework to ensure consumers aren't fleeced by prepaid cards."
"In the classic Dr. Seuss story, it was the Grinch who stole Christmas. Today, it's hidden fees inside seemingly innocent pre-paid debit cards," said Oregon Senator Jeff Merkley. "This legislation cracks down on practices that strip wealth from working families and protects consumers from these unscrupulous deals."
PREPAID CARD CONSUMER PROTECTION ACT OF 2010
SPONSORED BY SENATOR MENENDEZ
CO-SPONSORED BY ASSISTANT MAJORITY LEADER DURBIN AND SENATOR MERKLEY
• The Prepaid Card Consumer Protection Act of 2010 applies to prepaid cards, which are reloadable plastic cards often used as substitutes for checking accounts, debit cards, and sometimes credit cards
• Prepaid cards often come with a mountain of fees and very poor disclosure of those fees
• Prepaid cards do not have the same guaranteed consumer protections as debit cards and checking accounts, although they are marketed and used as substitutes for debit cards and checking accounts
This bill provides for:
• Full disclosure of all fees before the consumer buys the card, including a wallet-sized summary of all fees and a toll-free telephone number for customer service
• Limits on the types of fees that can be charged, including a ban on overdraft fees, balance inquiry fees, customer service fees, fees for inactivity, account closure fees, and other types of fees
• Consumer protections for prepaid cards such as (1) Regulation E protection against loss or theft and (2) FDIC insurance to protect consumers' money if the card company goes bankrupt. Debit cards already have these consumer protections, but prepaid cards don't
• The Consumer Financial Protection Bureau and the FDIC would issue regulations within 9 months of enactment
Consumers Union and Consumer Federation of America