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U.S. Senators Perdue, Isakson Aim to Block Common-Sense Measures to Protect Consumers from Prepaid Card Fraud, Fees
Bill introduced would repeal consumer protection rules through fast-track law, impacting more 440,000 Georgia households
Savannah, Ga. – February 13, 2017 – Today, Step Up Savannah called on Georgia’s U.S. Senators David Perdue and Johnny Isakson to side with Georgians by refusing to use an obscure law to block the Consumer Financial Protection Bureau’s (CFPB) prepaid card rule. The move—made public through a resolution filed in the U.S. Senate last week—would block basic protections against fraud, unauthorized charges and errors from being extend to all prepaid card users.
Just as concerning, the legislative tool Senators Perdue and Isakson have chosen for this effort, the Congressional Review Act (CRA), is arcane law that gives Congress a window to fast-track the repeal of regulations from being implemented without the threat of a filibuster. Once an approved CRA resolution is signed by the President, the targeted rule is blocked and the agency can never propose another substantially similar rule without prior approval from Congress.
By attempting to permanently shelter prepaid cards from the same consumer protections that apply to debit cards, Senators Perdue and Isakson would allow prepaid card provider NetSpend—whose parent company is based in Georgia—to continue taking $80 million annually from consumers in overdraft fees. NetSpend is the only major provider to charge overdraft fees on prepaid cards, which the company primarily sells at payday loan and check-cashing stores and through payroll cards used by employers of low-wage workers.
“It is alarming that in our own home state, our Senators would want to block common-sense consumer protections, such as
basic fraud protection and fee transparency, from applying to all prepaid card users, including the hundreds of thousands of Georgia households that use these products each year,” said Jennifer Singeisen, Executive Director of Step Up Savannah. “We call on Senators Perdue and Isakson to side with these Georgians, as well as countless others across the country, and not with companies like NetSpend who use overdraft fees to strip hard-earned dollars from the pockets of our most vulnerable consumers. The Consumer Financial Protection Bureau’s important work, including the return of nearly $12 billion to 29 million consumers, has been incredibly important to residents of Chatham County, Georgia and to our nation.”
For consumers locked out of the financial mainstream and for those seeking to avoid costly overdraft fees, prepaid cards represent an opportunity for families to have safe, affordable access to their hard-earned money. In Georgia alone, more than 440,000 underbanked households used prepaid cards in 2015, according to the FDIC. Assessing unscrupulous fees on these products diminishes the power of prepaid cards to help consumers get ahead, rather than falling farther behind.
NetSpend’s payday-lender-sold prepaid cards have unusual features that allow payday lenders to repay themselves by extracting money from the card, thus triggering overdraft fees for consumers who are largely unaware of how much money is being extracted and when. NetSpend’s cards offer an opt-in overdraft “protection” that allows the card to be used when it is empty, with the overdraft and a $15 to $25 fee taken out of the next deposit to the card.
A CFPB survey found that 98% of prepaid cards do not have overdraft fees. This includes the nation’s largest prepaid card company, Green Dot, which does not charge overdraft fees and supports the CFPB prepaid rule.
The CFPB rule currently under attack in the U.S. Senate was issued last fall and is scheduled to go into effect on October 1. It extends strong protections to prepaid card users, including some of the same basic fraud and fee protections that debit card users already enjoy. In addition, the rule includes new disclosure standards that would help consumers better understand key information about prepaid cards in order to comparison shop and make informed decisions. While the rule does not prohibit overdraft fees, it does require hybrid prepaid-credit cards that can overdraft to comply with established consumer protections for credit cards, including consideration of a consumer’s ability to make payments on credit extended to them.