In remarks at a May 23rd field hearing in North Carolina, the Consumer Financial Protection Bureau’s (“CFPB”) Director Richard Cordray announced the CFPB’s intent to address consumer protection in the rapidly expanding prepaid card market. While the prepaid industry is still a relatively small part of the financial services sector, it is expected to grow more than 40 percent each year over the next two years. And, in the past three years, the two largest managers of prepaid cards have seen the number of active cards in their network double. Prepaid cards provide consumers without traditional bank accounts more options to manage their money, enabling access to funds without having to use check-cashing businesses, and allowing consumers to make purchases and bill payments electronically. Increasingly, consumers are using the cards as a way to access wages, with the largest prepaid provider reporting that direct deposits increased by nearly 70 percent last year.
As Director Cordray described it, the CFPB’s focus will be on the twin goals of safety and transparency. To that end, the CFPB appears to be exploring four areas: protections in the event of loss or theft; the costs, benefits, and protections related to overdrafts; fee disclosure; and disclosure of whether the card is covered under FDIC insurance.
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