Home > 2016 > Personal Finance

Your Prepaid Card Is About to Get Better

Advertiser Disclosure Comments 0 Comments

Clear, straightforward information on fees and more protections on prepaid credit accounts? That’s the goal of the new federal consumer protections finalized by the Consumer Financial Protection Bureau (CFPB) on Tuesday.

According to a release from the CFPB, the new rule will require significant oversight by financial institutions. That means limiting “consumers’ losses when funds are stolen or cards are lost,” the CFPB said, investigating and resolving errors, and offering consumers “free and easy access to account information.” Notably, the CFPB also finalized new “Know Before You Owe” disclosures for prepaid accounts.

“Many of these important protections stem from the Electronic Fund Transfer Act, and they are intended to be similar to those for checking account consumers,” CFPB director Richard Cordray said in a separate prepared statement. “For instance, error resolution rights will now be similar for both types of accounts.”

Prepaid Account Protections 

Among the fastest growing consumer financial products in the U.S., the CFPB said, prepaid accounts are typically bought at retail outlets and online. (These include mobile wallets like PayPal or Google Wallet, peer-to-peer payment products and other electronic prepaid accounts that hold funds.) In 2012, said the CFPB, consumers put nearly $65 billion on these “general purpose reloadable cards,” an amount that’s expected to nearly double to $112 billion by 2018.

Here’s a look at the protections the CFPB brought prepaid account consumers under the Electronic Fund Transfer Act.

Free and easy access to account info: “Financial institutions must make certain account information available for free by telephone, online, and in writing upon request, unless they provide periodic statements,” the CFPB said.

Protections for lost cards and unauthorized transactions: Consumers are now protected against withdrawals, purchases and other unauthorized transactions — that is if their prepaid cards are lost or stolen. With the rule, consumers now have a way to get back their money so long as they notify the financial institution within a reasonable timeframe.

Error resolution rights: “Financial institutions must cooperate with consumers who find unauthorized or fraudulent charges, or other errors, on their accounts,” the CFPB said. If funds need repayment, these institutions will be held responsible, and if they cannot repay within a certain period of time, they’ll be required to “provisionally credit the amount to the consumer while it finishes its investigation,” said the CFPB.

Know Before You Owe Disclosures 

“Standard, easy-to-understand, upfront information” — that’s how the CFPB described its new Know Before You Owe prepaid disclosures, which may help consumers have an easier time comparison-shopping and make smarter decisions when it comes to their wallets. Here’s what that entails.

Clear information: Two forms with simply written disclosures will now be required, the CFPB said. One, which is shorter, outlines prepaid account information, including key fees for ATM withdrawals and balance inquiries. A longer disclosure form will have a full list of fees. You can view samples of the disclosure forms on the CFPB’s website.

Publicly available agreements: The CFPB now requires prepaid account issuers to post their agreements to the general public. They will also be accessible on a “Bureau-maintained website,” as the CFPB called it, down the line.

“These important new protections fill gaps in the law for consumers,” Cordray said in closing. “The rapidly growing ranks of prepaid users deserve a safe place to store their money and a practical way to carry out their financial transactions.”

Play It Safe 

While the CFPB has introduced these disclosure requirements and other protections for consumers using prepaid cards and credit products tied to prepaid accounts, which let you spend more money than you’ve deposited to the account, there are things you can do as a consumer to make sure you’re being smart with your money. For starters, it’s helpful to read the terms and conditions of any financial tool you’re considering very carefully. If something gives you pause, speak up, and don’t be afraid to ask questions.

Remember, prepaid cards generally don’t help you build credit. But no matter what type of card you’re using, it’s important to keep tabs on your credit to ensure you’re not the victim of fraud or other unscrupulous activities. You can view a free snapshot of your credit report by signing up for an account on Credit.com.

Image: dnberty

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team