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Kelly Dilworth

CFPB targets confusing prepaid card disclosures

If you're in the market for a new prepaid card, good luck trying to figure out how much you'll have to pay to use it.

Most prepaid card issuers disclose at least some type of fee schedule. But those disclosures are rarely uniform -- making it hard for consumers to compare them side-by-side. And according to one recent study from the nonprofit research group, Pew Charitable Trust, many prepaid card issuers only disclose some of the fees they charge.

Unreliable disclosures
I tried comparing prepaid card fees myself and was frustrated by the amount of time it took.

CFPB targets confusing prepaid card disclosures

Every fee disclosure was different. I couldn't just pull up several fee disclosures and compare them side-by-side the way I do with credit cards. Instead, I had to wade through each fee schedule separately and try to carefully match the fees on each card.

That was surprisingly difficult to do. Most fee disclosures listed basic prepaid card fees, such as monthly maintenance and reload fees first. So those were easier to figure out. But I had a much harder time identifying and comparing other types of fees, such as service charges, because the issuers often used different terminology to describe the same fee.

They also frequently put the charges in a different order, so you couldn't just glance at a fee schedule and identify a charge. Instead, you really had to look carefully for a specific fee, then look up and down for the same fee on a comparable card. 

I also had a hard time keeping track of all the fees that were listed, since they were often different from card to card -- and I couldn't always tell if I was viewing a complete list. According to the Pew Charitable Trust, most prepaid cards only share select information with applicants. So you can't always tell what you'll be charged when you buy the card.


In a study of the most popular prepaid cards on the market, "nearly every prepaid card failed to disclose at least one type of fee, service or consumer protection," wrote Pew researchers in a Feb. 26 issue brief.

CFPB steps in
The good news is that confusing card disclosures may not be around for much longer. The Consumer Financial Protection Bureau announced this week it's working on a much simpler prepaid card disclosure that it hopes will make it much easier for consumers to do card comparisons. 

On March 18, the CFPB unveiled two prototypes it's testing and asked for the public to view and comment on the models

The model disclosures are similar to Pew's. But they appear to be shorter than the Pew disclosures and list only a select group of fees.

If you want to see a complete list of possible fees, the CFPB disclosure provides a link to more information. However, it doesn't say whether issuers' complete fee schedules are supposed to be standardized as well. (If I were the CFPB, I'd push for it.)

The CFPB also hasn't said whether it will make the new disclosure form mandatory, much like the standard terms and conditions box (called the Schumer Box) that must be included with all credit cards. But in a recent blog post, the CFPB alluded to a rule it will announce this spring about prepaid card disclosures. So I wouldn't be surprised if prepaid card issuers start revamping their current disclosures.

In January, U.S. Sen. Mark D. Warner introduced legislation that would make simpler fee disclosures mandatory. But according to govtrack.us, his "Prepaid Card Disclosure Act" currently has just a 1 percent chance of enactment.

1 Comment(s)

Ben said:

I do think disclosures are a good idea, but I am resistant to a mandated approach.

Here’s why: not ever program is for the same purposes, use case, distribution setting, etc.

I would rather that consumer reports and watchdogs get the word out about non-transparent and/or usurious operators.

One size fits all is an improvement for some in the industry, but CARD.com/fees and https://m.greendot.com/custom.aspx?t=CARDFEES is pretty straight forward. I don’t see any improvement in what PPCD is proposing, do you? http://card.com/fees

Chase is smart to be first, it was good press, but white hat actors like CARD.com and GreenDot.com and https://www.walmartmoneycard.com/walmart/account/legal-info#feeplan know what they are doing and are providing “better faster cheaper fairer” financial offering vs. most major banks for most working adult Americans.


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