The federal agency tasked with making sure consumers can avoid misleading or even predatory lending practices recently received a letter from the nation's largest bankers asking it to be judicious in its decisions regarding the regulation of prepaid cards.
The American Bankers Association's recent letter to the Consumer Financial Protection Bureau asked that the agency take caution in applying the payment card rule, known as Regulation E, to prepaid debit accounts. In general, the rule provides protections to consumers for a number of different types of transactions, and is specifically designed to make sure the electronic systems used in processing such purchases are generally safe for use, and that unauthorized transactions are handled properly by processors or card issuers.
For one thing, many of the requirements under Regulation E have already been applied to prepaid cards voluntarily, as well as those under other rules, such as Regulations DD, CC and P, the letter said. As a consequence, they say that in many cases, these cards provide the same protections that traditional debit and credit cards already carry.
Specifics of the ABA's requests
But with regard to the implementation of Regulation E, the ABA asks that the bureau exercise caution in a number of ways, the letter said. For one thing, it asked that the CFPB recognize that many different kinds of prepaid debit cards exist, and therefore any rules it applies to these types of cards in general should take that into account and provide a certain amount of flexibility, especially where disclosures about the accounts are concerned. Further, it asked that the disclosures the CFPB requires of card issuers be as clear and easy for consumers to understand as possible.
And while the CFPB has set requirements for how disclosures of periodic statement data and resolution of errors or other issues related to the account, the ABA asked that these be adjusted for prepaid card accounts, the letter said. More importantly, though, it wants the CFPB to be as unrestrictive as possible in regulating these accounts, and apply the necessary consumer protection laws to them.
Specifically, it wants the agency to allow consumers or the marketplace to decide what constitutes fair pricing and features for prepaid cards, the letter said. It also noted that any attempts to constrain practices in this regard might end up increasing the prices consumers face for using these cards in general. Any rule that regulates specific terms and conditions would be harmful, it said, and typically the marketplace decides fairly quickly what is and is not predatory. It cited the quick and heavy backlash against the fee-loaded Kardashian-backed prepaid card in 2010 as evidence of this being the most effective way for consumers to dictate what they will and will not accept from card issuers.
Further, it would like to see the CFPB allow existing rules such as FDIC disclosure requirements and those related to overdrafts, the report said. The banker group believes that in doing so, the agency would avoid giving consumers a confusing or misleading picture of their accounts, and add needless complexity for card issuers. Finally, it asked that the watchdog remember that payment types including prepaid cards are constantly evolving, and for this reason details related to these accounts can change quickly.
"We stress that the market and consumers should determine GPR card features, pricing, and terms and that the Bureau should not directly or indirectly regulate their prices and features," wrote Nessa Feddis, vice president and senior counsel for the ABA's Center for Regulatory Compliance, in the group's conclusion. "The Bureau should also coordinate other consumer protection laws that might apply to [prepaid] cards and rely on existing rules where appropriate to promote consistent, uniform disclosures and rules."
The CFPB has been putting a large number of rules in place to help consumers protect their finances since gaining full regulatory power over the lending industry slightly more than a year ago, but has significantly increased its efforts under new director Richard Cordray, who took office in January. Now, the agency oversees issues such as credit card and mortgage lending, credit reporting, and more. Further, it has plans to continue expanding operations in the future.
However, you should also take the time to do as much protecting of your personal finances as possible by yourself. This should include ordering a copy of your credit report to determine whether any unfair markings are having an adverse effect on your credit score. If you find any, working with a credit repair law firm can help to clear up these entries as quickly and easily as possible and return your standing to where it should be.