The Consumer Financial Protection Bureau held a field hearing in Durham, North Carolina yesterday to hear from advocates, the prepaid card industry, and consumers about what protections are needed for prepaid cards, also known as general purpose reloadable (GPR) cards. The CFPB is beginning the process of writing consumer protection standards for GPR cards and is collecting public input. Woodstock Institute Vice President Tom Feltner testified in favor of extending federal consumer protections to GPR cards. We believe that:


Whenever consumers swipe a card, they should be confident that the funds they have deposited will be available, that they are protected against fraud, and that their deposits are insured. Federal regulations, such as Regulation E, spell out clear funds availability, deposit insurance, and fraud protection standards for debit and credit cards. GPR cards lack consistent standards on these issues. No matter whether the card of choice is debit, credit, or GPR, consumers need and deserve the same protections and standards in place.

GPR cards should help consumers access wealth-building financial services, not limit it. Most prepaid cards lack services that allow consumers to accumulate assets by easily paying bills or transferring funds to a savings account. Financial institutions that offer prepaid cards should have a clear system in place to allow consumers to move into financial products with more functionality over time and connect prepaid cards to products like savings accounts—just like checking account users can.

Offering high-cost credit products through GPR cards raises their risk profile and undermines state consumer protections on short-term loans. Offering high-cost, short-term credit products similar to payday loans on GPR cards turns them from a “pay first” product into a riskier “pay later” product. It also allows lenders to circumvent state consumer protection laws designed to limit the cycle of debt and establish interest rate caps. The CFPB should prohibit the offering of credit products through GPR cards.

You can learn more about consumer protections for prepaid cards by reading Feltner’s full testimony.