Are prepaid charge cards assisting or hurting consumers?

Are prepaid charge cards assisting or hurting consumers?

The middle for Responsible Lending is a non-profit research and policy company specialized in protecting home-ownership and household wide range.

Let us start with the after premise: when it comes to technology thus main item expenses, basic function reloadable prepaid cards are indistinguishable from debit cards associated with checkless checking reports.

Both prepaid and debit cards must maintain a database of specific account documents; both access the exact same repayments system via a bank member of a funds transfer system such as for example Visa or MasterCard.

Both prepaid and debit cards have actually a requirement to “know your consumer” because the records must go through a bank to gain access to the re payments system.

Thus, the greatest differences when considering prepaid cards and debit cards are distinctions maybe maybe not in technology however in legislation, or what exactly is frequently referred to as “regulatory arbitrage” in support of the providers that are unregulated.

A few examples of regulatory arbitrage between bank providers of checkless debit card reports and presently unregulated card that is prepaid consist of:

  • Debit cards have periodic written statements of account under Regulation E;
  • Regulated debit card providers have mandated capital that is minimum;
  • Debit cards have customer protections for missing cards or card that is unauthorized; and
  • Prepaid cards are exempt from the Durbin interchange demands, at the least for the smaller, rent-a-charter banks.

Prepaid cards must certanly be expected to meet with the after three guidelines:

  • No arbitration that is mandatory
  • No tie-in to financial obligation items, either ahead of the prepaid credit card load or following the card stability is expended. Read more