CFPB to regulate prepaid debit cards
The Consumer Financial Protection Bureau takes aim at hidden fees for prepaid debit cards, the fastest growing form of payment in the U.S.
Kai Ryssdal: You got your credit cards. You got your debit cards.
And you got your prepaid debit cards. Parents, for instance, can use them to give their kids plastic but control spending at the same time. Banks are getting in on the action as these things become more popular. But there are, of course, hidden fees. So today the Consumer Financial Protection Bureau stepped in.
Marketplace's Stacey Vanek Smith has more.
Stacey Vanek Smith: Prepaid debit cards have traditionally catered to lower income consumers and people with bad credit.
Ad: Everybody's eligible to sign up. You don't even need a bank account!
Now, prepaid cards are the fastest growing method of payment in the U.S., especially for younger Americans.
Ron Shevlin is a senior analyst with the Aite Group.
Ron Shevlin: Over the past couple of years, that market has drastically changed. Practically half of Gen Y-ers have a prepaid debit card.
About seven million of the cards are in circulation in the U.S. The market is about $57 billion and is expected to triple within two years. Big banks like Chase are getting into the market.
Greg McBride is a senior analyst with Bankrate.com. He says the cards are profitable.
Greg McBride: It is just another way for them to fill the revenue hole that's been created by recent regulations.
Limits on the swipe fees banks can charge merchants for credit cards and debit cards don't apply to prepaid cards, and the fees they charge consumers aren't really regulated either, says McBride.
McBride: Prepaid cards have traditionally been rife with fees.
A survey from the Consumers Union found prepaid cards often charge hefty fees to customers to for checking their balance or even activating the card.
Michelle Jun is a senior attorney with the Consumers Union.
Michelle Jun: The fee structures, they can be changed at any times and oftentimes, consumers won't even know how much the card will cost them until it's too late.
The Consumer Financial Protection Bureau plans to look into fee disclosure as well as making sure customers aren't liable for payments if the card gets stolen.
In New York, I'm Stacey Vanek Smith for Marketplace.