Using a prepaid credit card and reloading at your convenience sounds like a great idea in theory, but there are many hidden fees and dangers involved. That’s why the Consumers Union, the policy and advocacy arm of Consumer Reports, is urging the Consumer Financial Protection Bureau today to adopt new rules to protect consumers who rely on prepaid cards.
The CFPB is holding a field hearing today in Durham, N.C. on prepaid cards, which have become very popular as an alternative to traditional banking accounts. The CFPB will feature a live stream of the event online at www.consumerfinance.gov beginning at noon eastern today.
In April, our wise elder siblings at Consumer Reports released a report that found that industry competition is beginning to help bring down fees, but fees aren’t always disclosed up front and can still add up quickly. Those prepaid cards offer weaker consumer protections than those provided by traditional debit cards.
“The prepaid card market has exploded in the U.S. but consumers still don’t enjoy the protections they need to ensure they are getting a fair deal,” said Michelle Jun, senior attorney for Consumers Union. “It’s time for the CFPB to require clear disclosure of all fees in a simple format so consumers know the costs before they purchase a card. Prepaid cards should get the same strong protections as traditional debit cards so consumers have the peace of mind that their money is safe if their card is lost or stolen.”
Consumers Union wants the CFPB or Federal Trade Commission to monitor credit building claims made by prepaid card issuers to ensure consumers aren’t being misled.