CFPB: The Wild West Is Over for Prepaid Cards

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Here’s some cheery news: the CFPB has issued new rules to rein in the wild, wild West of prepaid cards. I had to read to the end of the story to find out what the new rules actually were, but eventually I was rewarded for my patience:

The rules specifically require financial institutions that offer prepaid accounts to provide consumers with free and easy access to their account balances, transaction history and a list of any fees charged….Consumers also get protections against fraud under the new rules. A consumer who promptly notifies the issuer about unauthorized transactions will be responsible for only $50 worth of charges….The CFPB also is setting an industrywide standard on disclosures to help consumers understand fees upfront and allow them to easily comparison shop.

Some issuers allow consumers to spend more money than they have on their cards, and the CFPB rules will extend credit card-type protections to those users. Companies offering such cards will have to make sure the consumer has the ability to repay before offering credit. Issuers also will have to give customers regular statements detailing fees, interest rates and other information and must offer at least 21 days to repay the credit before charging “reasonable and proportional” late fees.

Consumers also must be asked before money loaded into the card, such as from a paycheck, can be used to repay a credit bill. And issuers cannot offer credit until 30 days after a prepaid account has been opened.

These all seem like pretty reasonable rules. And they don’t apply only to cards:

Popular mobile-payment apps including PayPal Holdings Inc.’s Venmo and Alphabet Inc.’s Google Wallet will be subject to more stringent government oversight under a regulation completed Wednesday….Analysts say other products that could be covered by the rule include Square Inc.’s Square Cash and fintech firm Dwolla’s payment tool.

The digital folks all objected vociferously, of course, because tech. Everyone knows that tech is totally different from non-tech and needs to be allowed to breathe free or else all human progress will grind to a halt.

Luckily the CFPB gave this argument exactly the consideration it deserved. If you’re storing money and providing credit, then you have to play fair with your customers. The fact that a microprocessor is involved somewhere along the line doesn’t change that.

POSTSCRIPT: I’m eager to hear from Donald Trump and the Republican Party why this is an outrageous offense against the free market right of prepaid card vendors to scam users out of the maximum possible amount of money in the form of exorbitant fees and interest on unwanted loans.

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And the truth is, going into the final 4 days of the year we still needed to raise $TK to hit our $350,000 goal and start 2021 on track. It's nerve-wracking, wondering if the big spike we normally see at the end of December is going to be another thing that doesn't go as planned in 2020, or worse, if, now that Donald Trump is set to leave the White House (for longer than a taxpayer-funded golf trip to a property he owns), folks might be pulling back from fighting for the truth and a democracy and think the hard work is done.

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