NCLC Attacks Overdraft on Prepaid Products Again (July 16, 2013)
July 16, 2013
The National Consumer Law Center (NCLC) again is urging the Consumer Financial Protection Bureau (CFPB) to prohibit overdraft on prepaid products and limit the ways in which credit and prepaid may be associated. Last week, the NCLC issued a brief, Keep Prepaid Cards and Credit Products Separate, which says, “To ensure the fairness and integrity of both prepaid cards and of credit products, overdraft fees must be kept off of prepaid cards, and credit must be provided through transparent and fair credit accounts that are fully separate from prepaid cards.” While the briefing goes on to explain that prepaid providers could also offer a credit product, the NCLC maintains that any credit offering would have to be on a separate card/account. The center also claims that payday lenders have used prepaid to circumvent state usury laws and that permitting overdraft fees on prepaid cards will lead to unfair, deceptive and abusive practices.
The Network Branded Prepaid Card Association supports the option to offer all features and services traditionally associated with checking accounts to prepaid cardholders, provided the features and services are offered via “opt-in” and each service is disclosed appropriately, according to a policy statement. “There is no reasonable basis to deny those who choose to use prepaid products access to ‘opt-in’ features and services that would be available to them with a checking account or debit card, for example,” the position paper says. “Prepaid products, and consumers who choose them, should not be subject to more onerous terms than with traditional checking accounts.”
The CFPB specifically requested more information on credit features, including overdraft, in its 2012 advanced notice of proposed rulemaking. And the NCLC was one of several consumer advocacy groups that called on the agency to ban overdraft and payday loan features on GPR cards. The agency is expected to issue proposed rules on GPR cards sometime in the next 12-18 months.