States Urge Congress to Put Needs of Consumers Before Prepaid Card Industry
Consumerist reports that 18 states, including Maryland, have urged lawmakers to put the interests of consumers before the prepaid card industry. A letter to Speaker of the House Paul Ryan, from attorney generals for each of the 18 states, urge congress to not eliminate transparency and fee legislations protecting consumers with prepaid cards.
Congress is considering dismantling the prepaid card rules, specifically within S.J. Res.19, H.J. Res 62 and H.J. Res 73.
The rules in question were enacted by the Consumer Financial Protection Bureau after reviewing thousands of comments. The CFPB’s rules intend to give prepaid card users some of the protections given to traditional credit card users.
The letter outlines issues for consumers using prepaid cards. Studies found that 10% of householders used prepaid cards, and 27.1% without bank accounts chose prepaid cards. Prepaid cards are one of the fastest financial products for consumers.
Findings outlined in the letter suggest that consumers incur substantial fees that are not transparent. A 2014 study found that consumers incur fees of $10 – $30 per month using one of the major prepaid card companies.
Restaurant workers, often paid with prepaid cards, found that almost half of 140,000 hourly employees were paid using prepaid cards. The workers are assessed over 10 different fees when using their card, such as $0.99 to pay a bill.
The same report found that 63% of workers were not made aware that they would be charged fees to access their money.
Industries with low-wage workers are a growing concern for Maryland’s attorney general. In 2015, more people in low-wage positions were granted payroll cards than people receiving paper checks. The growing trend puts an additional burden on low-wage workers who already have difficulty paying their bills.
The fees, unlike those associated with fees for using a credit card machine for business, are assessed on the consumer’s money they earned rather than charged to a credit card. The growing number of people without bank accounts are forced to accept prepaid cards as compensation for hourly wages, facing unwanted financial burdens in the process.
Student loans, a growing issue for youths, were found to also be loaded onto prepaid cards to receive Federal financial aid.
“The resolutions to stop implementation of the CFPB’s Final Rule were filed under the Congressional Review Act (CRA), a law giving Congress, with the President’s signature, a window to veto a rule from going into effect. The CRA has special provisions to expedite a vote and prevent a filibuster. If a rule is blocked by a CRA vote, the agency is forever barred from enacting a substantially similar rule unless Congress authorizes it,” states the letter.
Maryland’s Attorney General, Brian E. Frosh, signed the letter urging Congress to listen to the issues contained in the letter, to oppose the three resolutions (S.J. Res 19, H.J. Res 62 and H.J Res 72) and help provide consumer protection in the growing prepaid industry.
Attorney Generals from the District of Columbia, Iowa, California, Hawaii, Maine, Massachusetts, Minnesota, Illinois, Mississippi, Vermont, New York, Virginia, Washington, North Carolina, Oregon, Rhode Island and Pennsylvania all signed the letter.
Author: Jacob Maslow