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New Rules Make Prepaid Cards Better

October 5th, 2016 · No Comments · Prepaid Cards

by Kristy Welsh

(Last Updated On: February 26, 2018)

New rules make prepaid cards betterAt best, prepaid cards are a helpful convenience. At worst, they are a confusing expense. To bridge the gap between the two, the Consumer Financial Protection Bureau (CFPB) has finalized new prepaid card rules set to go into effect next year. Here’s what to expect.

About Prepaid Cards

Prepaid cards are financial tools that consumers can use to store and spend money for a fee. Examples include traditional reloadable cards, as well as mobile wallets, peer-to-peer products, payroll cards, student financial aid disbursement cards, tax refund cards, and cards used to disburse unemployment benefits and child support.

About the New Rules

Starting next year, prepaid card holders can expect all of the following federal consumer protections:

1) Free access to your account balance, transaction history, and fees you’ve been charged

2) Requirement that prepaid card issuers investigate and resolve reported errors

3) Consumer liability limited to $50 in the event a prepaid card is lost or stolen (provided the consumer reports the loss to the credit card issuer)

4) Use of short- and long-form disclosures outlining all applicable fees

5) Publicly available credit card agreements

6) New rules applicable to credit products associated with prepaid cards, including:

  • Waiting 30 days before offering a credit product to a prepaid card customer
  • Verifying a consumer’s ability to pay before offering them a credit product
  • Not allowing fees to exceed 25 percent of the credit limit during the first year
  • Providing statements to customers, as required of credit card issuers
  • Allowing consumers 21 days to pay before assessing a late fee
  • Prohibiting the seizing of funds from the prepaid card to cover the credit product without the consumer’s express permission

These rules are set to go into effect October 1, 2017. However, prepaid card issuers have until October 2018 to submit required agreements to the CFPB.

Do You Use Prepaid Cards?

If so, what do you think about the new rules? Do they go far enough? Why or why not?

Learn more about how the CFPB protects consumers in the payment card market.

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