This week the Office of Consumer Affairs hosted the 23rd Annual National Consumer Protection Week Conference with our co-sponsors the Division of Banks, Suffolk University Law School and ConsumerWorld.org. The main topic of the conference was prepaid cards, and each of our speakers gave some insight into this popular financial product.
A prepaid card is a card – like a debit or credit card – offered by a financial intuition or retailer that has a specific amount of money pre-loaded onto it. They offer consumers many benefits such as paying bills online and depositing their paychecks onto them. Over the past decade the prepaid card industry has exploded, with more and more people turning to them for everyday use. An article in USA Today by Sheila Bair noted that the use of these cards has grown over 600% since 2010 and that Americans will likely load over $200 billion on them this year.
Prepaid cards are attractive to consumers because, unlike cash, many can be replaced if lost or stolen (though this process can be fairly complex). Consumers don’t need a bank account to use a prepaid card, and these cards are a good way for the unbanked population to avoid check cashing fees. A person’s credit history has no impact on his or her ability to get a prepaid card. There is the option to have multiple cards associated with one prepaid account, and on most cards there is no risk of overdrawing on the account. These are especially good for parents or caregivers who wish to monitor the expenses of a dependent.
Though there are many benefits to prepaid cards, they pose many problems as well. There are limited federal regulations that apply to these cards. There is no federally mandated fraud protection and no requirement for FDIC insurance if the card is issued by a non-bank entity. The cards do not help build credit, so proper management of them will not positively impact credit history. There is also no requirement for periodic statements, making it difficult for the consumer to keep track of the amount of pre-loaded money left on the card.
The biggest item of concern for the Office of Consumer Affairs is that prepaid cards are associated with high use-related fees and extra charges. Associate Dean Kathleen Engel of Suffolk University Law School outlined many of these fees at Tuesday’s conference. Here are just some of the fees a consumer can be charged for using a prepaid card:
- Card purchasing fee
- Transaction fee
- Monthly fee
- ATM withdrawal fee
- Bank teller withdrawal fee
- Customer service call fee
- Paper statement fee
- Balance inquiry fee
- Cash back at retailers fee
- Card replacement fee
- Declined transaction fee
- Declined ATM withdrawal fee
- PIN use fee
- Monthly inactivity fee
- Fund deposit fee
There’s no limit on the size or number of fees companies are allowed to charge. Most of the fees are not fully disclosed, as there is no uniform disclosure required. This makes it hard for consumers to shop and compare fees from one prepaid card to the next.
It is also nearly impossible to redeem the full value of these cards. When a consumer has just a few dollars or cents left on the card, if she doesn’t know the exact amount on the card, the transaction may not be completed. Merchants generally will not be able to determine the available balance.
Nowadays, these cards are being used for everything from insurance and entitlement benefits to rebates for cell phones, appliances and other items. If possible, ask for refunds or rebates to be delivered by direct deposit or in the form of a check so that you’re not being charged these fees.
Chances Are, You’ve Had to Deal with One of These 5 Consumer Issues posted on Aug 14
Last month, the Consumer Federation of America published a list of their top ten consumer complaints. In it, they named many of the issues that the Office of Consumer Affairs and Business Regulations keeps consumers informed about, ranging from auto complaints to fraud and scams. …Continue Reading Chances Are, You’ve Had to Deal with One of These 5 Consumer Issues
The Office of Consumer Affairs and Business Regulation Offers Disaster Relief Tips for Residents of Revere posted on Aug 5
The Massachusetts Office of Consumer Affairs and Business Regulations advises residents of Revere who were impacted by last week’s tornado to be cautious as they look for repair assistance and seek to file insurance claims. It is important that consumers make sure they are hiring …Continue Reading The Office of Consumer Affairs and Business Regulation Offers Disaster Relief Tips for Residents of Revere
Craigslist Scam Alert: How You Could You Be Paying Someone to Steal Your Personal Info posted on Jul 24
Over the past week, the Consumer Hotline has received two complaints about a scam on Craigslist where buyers are scamming sellers out of money and their personal information. Callers reported being scammed when trying to sell an item on Craigslist. Online buyers would offer to …Continue Reading Craigslist Scam Alert: How You Could You Be Paying Someone to Steal Your Personal Info