Major Prepaid Card Providers Give a Polite Response to the CFPB’s Proposed Regs

Some of the nation’s largest prepaid card companies are either giving a public thumbs up to the Consumer Financial Protection Bureau’s proposed regulations for prepaid card accounts or at least not saying they’re spoiling for a fight with the federal government.

Steve Streit, chairman and chief executive of Pasadena, Calif.-based Green Dot Corp., a big prepaid card program manager and issuer, likened the current prepaid industry to a wide-open sports contest. “I, as a person, and Green Dot, as a company, fully support the CFPB\'s mission,” Streit said in written testimony Thursday at a CFPB field hearing in Wilmington, Del., just after the bureau announced the planned rules. “A football game without rules and referees isn't a sport; it's a brawl. Like sports, to be successful, industry also needs rules and referees to ensure fairness, integrity and safety for all participants.”

Streit said the regulations, which run nearly 900 pages in length and would apply many of the federal protections currently available on conventional debit cards and credit cards, would not have a material effect on his company’s financial results. Green Dot also also said it “fully supports” the CFPB’s plan to bring Regulation E consumer protections for lost and stolen funds and disputed transactions to prepaid cards, as well as the bureau’s plan for handling overdraft programs linked to prepaid accounts. Reg E currently governs demand-deposit accounts.

The rules will cover disclosures, fees, transaction disputes, and other matters. A 90-day comment period will begin once the CFPB publishes its proposed rules in the Federal Register.

Wilmington-based The Bancorp Bank, which having issued more than 70 million cards claims to be the nation’s leading prepaid card issuer, gave a thumbs up to the CFPB’s goals even though it withheld judgment on the proposed rules.

“Like any financial instrument, users of prepaid products should have access to certain protections against fraud, errors and overdraft fees,” Frank M. Mastrangelo, the bank’s president and chief operating operating officer, said in a statement. “In fact, many existing programs already provide these protections. That said, we support what the CFPB is attempting to codify in regulation and look forward to a closer examination of the proposed rules.”

Jeremy Kuiper, The Bancorp’s managing director, Payment Solutions, also said in a statement that “the standardization of consumer protections within the prepaid category will ultimately bolster consumer confidence. I believe the result will be more widespread adoption and usage of what is a very sound financial tool for many consumers looking to better manage their money or more actively participate in electronic-commerce systems both in-store or online.”

While prepaid cards to date haven’t been covered by some of the more established federal regulations, some analysts have questioned the need for the CFPB’s lengthy rules, saying that over time various rules have been extended to prepaid cards, and that industry also has beefed up protections on its own.

Consumers Union, an advocacy group, issued a statement saying, “The CFPB has proposed some important new safeguards that will make a real difference for consumers.” But Consumers Union said the CFPB could have gone farther, such as by requiring issuers to provide Federal Deposit Insurance Corp. coverage on prepaid cards. “Instead the CFPB proposed that card issuers simply disclose that their cards don’t provide FDIC insurance,” the group said.

Consumers Union also said the CFPB plan fell short by not outright banning overdraft charges on prepaid accounts.