Video Shows You Don’t Need All That Fine Print In Prepaid Card Fee Disclosures

Prepaid debit cards may offer a convenient alternative for unbanked consumers, but there are often unexpected costs buried in all the fine print of the cards’ disclosure documents that most people never read. It doesn’t need to be that way.

Today, the Pew Charitable Trusts unveiled the above video comparing a typical prepaid card packaging to their own disclosure box that aims provide easy comparison of prepaid card fees and terms and conditions.

The video features two consumers, Lisa and Jim, who are purchasing prepaid cards to better budget their expenses for a vacation. While Lisa’s prepaid card uses the Pew disclosure box, Jim’s does not.

Jim’s “typical” prepaid card box only lists some of the fees associated with the card. To see the full list of fees, Jim has to purchase the card and then read the fine print on a hard to find Terms and Conditions paper.

While Jim’s struggling to read his card’s fine print, Lisa is off enjoying a Hawaiian vacation.

“We wanted to show in a very accessible way how the disclosure would work,” Susan Weinstock, director of consumer banking research for Pew, tells Consumerist. “We thought doing something fun and engaging would provide that opportunity.”

Although the short video may not be groundbreaking, it does get the point across that prepaid cards can be tricky products to invest in; because there are no federal laws or regulations to protect consumers who use the cards, they could be subjected to hidden fees, unauthorized transactions, or loss of funds.

The video is Pew’s latest effort to bring awareness to the hidden dangers of prepaid cards. Back in February, Pew unveiled the model disclosure box in conjunction with a study detailing the lack of transparency in current card disclosures.

“Many prepaid cards have summary disclosures and leave other fees buried in terms of conditions, or in longer complicated disclosures that are harder to reach – either online or in the case of retail you have to open the package,” Thaddeus King, senior reseacher for consumer banking tells Consumerist.

Pew’s disclosure box – which shouldn’t be confused with a similar box that the Consumer Financial Protection Bureau is working on – fits on the inside flap of the existing card packaging, making it more convenient for consumers to find fees before purchasing the prepaid card.

Pew researchers found that nearly all of the 66 cards included in its study failed to disclose at least one type of fee, service, or consumer protection.

That research was echoed in an April Bankrate.com survey that examined 30 popular prepaid cards and found that while all charged fees, the actual fee structure varied considerably.

Officials with Pew say the use of its disclosure box would allow for less surprises when it comes to using prepaid cards.

The first company to embrace Pew’s box was JPMorgan Chase. The company announced earlier this year that its Chase Liquid prepaid cards would be the first product to employ Pew’s disclosure box. The company also uses Pew’s checking account disclosure box.

Pew is working on expanding the reach of its box by partnering with Visa in the future. The major credit card company has decide to create a seal of approval designation for Visa-backed prepaid cards. In order for a card to receive the seal they must employ the disclosure box, Weinstock says.

Aside from bringing awareness to consumers, Pew officials hope the prepaid video encourages federal regulators to finish their work on creating consumer protections when it comes to the cards.

“Once rules are in place this will be a safe product that can be a much cheaper option than a checking account,” Weinstock says.

Pew previously made several recommendations to the CFPB to make prepaid cards safer for consumers:

  • Prepaid cards should not have overdraft or other automated or linked credit features.
  • Prepaid cardholders should be protected against liability for unauthorized transactions that occur either when a card is lost or stolen or a charge is incorrectly applied.
  • Prepaid cardholders should have access to account information and transaction history.
  • Prepaid cards should be required to provide information about terms, conditions, and fees in a uniform, concise, and easy-to-read format. This information should be included with the card packaging so that it is accessible pre-purchase at retail outlets as well as online.
  • Prepaid card funds should be federally insured against loss caused by the failure of an institution.
  • Predispute binding arbitration clauses in cardholder agreements, which prevent cardholders from having the choice to challenge unfair and deceptive practices or other legal violations in court, should be prohibited.