Unauthorised transactions vex US prepaid consumers – CFPB’s latest report
Prepaid complaints to the Consumer Financial Protection Bureau (CFPB) in the US hit 2,500 in 2016, accounting for about 0.9% of the 291,400 complaints in agency’s latest Consumer Response Annual Report, writes Paybefore (Banking Technology‘s sister publication).
The leading type of complaints about prepaid products involved unauthorised transactions or other transactions issues. The amount of prepaid complaints held steady from 2015.
Debt collection issues accounted for 30% of all complaints to the CFPB last year, the largest single chunk and about the same as 2015, when those complaints made up 31%. Other complaints include:
- credit reporting – about 19%, compared with 20% in 2015;
- mortgages – 18%, down from 19%;
- bank account or services – 10%, up from 8%;
- credit cards – 9%, up from 8%;
- consumer loans – 6%, up from 5%;
- student loans – 4%, up from 3%;
- payday loans – 2%, the same as in 2015;
- prepaid – 0.9%, down from 1%;
- money transfers – 0.8%, down from 0.9%;
- other financial services – 0.7%, the same as in 2015.
Unauthorised transactions or other transactions issues accounted for 33% of all the complaints in the prepaid category in 2016.
Other prepaid issues consumers cited include managing, opening or closing accounts (29%); fraud or scams (22%); fees (7%); advertising, marketing or disclosures (4%); adding money (about 4%); and overdraft, savings or rewards features (about 2%).
Access to funds
“Frequently, these consumers also expressed hardships resulting from the lack of access to their funds,” the report says. “Some consumers stated that after disputing a particular charge, the company would often freeze the entire available balance to prevent further loss while the claim was under review. During the review process, companies sometimes requested additional information – such as purchase receipts or original packaging – which the consumers often stated was no longer in their possession.”
The report comes on the heels of NetSpend settling with the FTC over claims that the company deceived cardholders and denied or delayed their access to funds contrary to marketing messages about instant access to funds.
It is worth noting that acting FTC chair Maureen Ohlhausen voted against the settlement, saying: “In the context of direct deposit advertising, reasonable consumers would interpret ‘immediate access’ to refer to the timesaving benefits of direct deposit as compared to waiting for a paper cheque to be mailed, physically depositing the cheque at the bank and waiting for the bank to make those funds available in an individual’s account. Banks, credit unions and even the Social Security Administration commonly use the phrase ‘immediate access’ to describe the timesaving benefits of direct deposit.”