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Prepaid cards: Help design a new disclosure

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Today, we’re in Los Angeles, CA to show people potential disclosures that we may propose to be used on the packaging of prepaid cards. We’re developing new disclosures as part of a larger project that will provide a variety of protections for prepaid card users. We expect to propose a rule on this topic later this spring.

Current disclosures

Currently, each prepaid card company’s retail package discloses different information, which makes it difficult to do side-by-side comparisons. Below are a few examples of the disclosures that appear today on the packaging of several major prepaid cards that we recently bought in stores near our Washington headquarters:

201403_cfpb_prepaid-cards-attachment-A

As you can see from these examples, each prepaid card has a different style and format for presenting fee and other important information. We think this could make it difficult to find the information important to you and to compare fee information between cards.

We’re developing a model disclosure form to standardize these disclosures to include in the proposed rule. We want our model form to clearly present a prepaid card’s most important fees so you can easily identify the best prepaid card for your needs.

Testing new disclosures

To help us design this model disclosure, we’re conducting interview testing with consumers around the country. We’re presenting testing participants with versions of the forms we’ve developed to see which works the best. Our first round of testing took place last month in Baltimore, MD, our second round of testing begins today, and we expect to complete the testing in April.

These are two model form designs that we’re testing in Los Angeles:

Model form 1

201403_cfpb_modelformdesign_1

Model form 2

201403_cfpb_modelformdesign_2

Tell us what you think

Now, we want to hear from you! Take a look, and tell us if you think these model forms do a better job of disclosing fee information compared to other forms you’ve seen on prepaid card packaging. We’re eager to get feedback from anyone who is interested in making prepaid card disclosures better.

While you’re looking at the forms, think about these questions:

  • Do you understand how much each of these cards will cost to use?
  • What would you like to see added or changed? Is there some way to make the information clearer?
  • Is there anything you find confusing?

We want to get your feedback now so that we can consider it as we continue testing model forms over the next few weeks.

If you want to influence the design of a new prepaid card fee disclosure, let us know what you think! You can use the comments section below, send us a tweet, let us know on Facebook or send us an email.

Giving or receiving gift cards? Know the terms and avoid surprises

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My family and I just moved into a new house. With all the packing and unpacking, my kids and I found three gift cards we had forgotten about. Mine was from my birthday, almost a year ago. Theirs were from last Christmas. So while most consumers are shopping for this year’s holiday season, we’re putting the wraps on last year by spending these long-lost gift cards.

If you have old gift cards sitting around, you might want to consider doing the same. Federal rules say that gift cards cannot charge inactivity or service charges for 12 months, but after that first year, these fees could start to eat away at your card’s value.

If you find a gift card that has an expiration date, call the phone number on the card to see if the funds are still available. Under current federal law, a gift card cannot be sold that will expire in less than five years. If funds are still available to you, a new card must be issued at no cost to you. Your state may provide additional protections and rights.

Thinking about giving a gift card to someone for the holidays?

Here’s a quick rundown of the different kinds of cards:

  • Store gift cards
    Branded by a single merchant or group of merchants, and can only be used at those stores.
  • Network branded gift cards
    These will have a logo like American Express, Discover, MasterCard, or Visa and can be used wherever the network credit cards are used. They are reloadable, which means the recipient can add more money to them when they run out.
  • Reloadable prepaid cards
    You can use these cards the same way you’d use reloadable gift cards, but the rules that cover these cards are not the same. If it isn’t sold as a gift card, then the federal rules that cover gift cards don’t apply. For example, for such cards, the card issuer might immediately start charging fees, like monthly service fees.

When you give the card, give the terms and conditions and the receipt, too. The terms and conditions are sometimes included in the original packaging. Also, consider the financial condition of the business offering the card. For example, if you give a store gift card and the retailer goes under, the card may not be redeemable. Also, if locations near your recipient close, the card may be harder to use.

If you get a card as a gift

Here’s how to make sure you’re getting the most out of it.

  • Gift cards should spell out what fees they charge, so read the fine print. For example, even though the federal rules are the same for all gift cards, additional policies may be set by the merchant or bank issuing the card. Be sure you understand these policies.
  • What happens if you lose your card or if it’s stolen? Some issuers, like stores, might not replace them . Other issuers might replace the card, but only if you registered it before it was lost or stolen.Use the card sooner, rather than later. Take my word for it, these cards can be easily misplaced and forgotten.
  • Write down the card number, security code, and customer service phone number and keep them in a safe place.
  • Treat the card like cash, especially if the issuer will not replace it, and keep your card until you are sure you will not be making any returns. Some merchants require that refunds be added back to the card.

To learn more about pre-paid cards, Ask CFPB.

Live from Durham, NC!

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We’re in Durham, NC, today to hold a field hearing on general purpose reloadable prepaid cards, commonly known as prepaid cards. If you’re looking for our livestream, you’ve come to the right place.

Today’s live events have now ended. You can watch the recording below, or read CFPB Director Richard Cordray’s remarks.

If you missed the event, CFPB Director Richard Cordray announced that the Bureau is asking for comments about general purpose reloadable prepaid cards, referred to here simply as “prepaid cards”, through an Advance Notice of Proposed Rulemaking (ANPR). Before we act, we want your input. Here are some of the things we’re considering:

What steps could the Bureau take to most effectively regulate these products to provide the consumer with transparent, useful, and timely fee disclosures? Should market participants be required to provide disclosure pre-sale, post-sale, or both?

The Bureau intends to extend federal consumer protections to prepaid cards. Should proposed consumer protections be the same as for checking account debit cards? Should there be any modifications to protections as they are extended to prepaid cards?

Currently, most prepaid cards do not offer a savings account associated with the card. The Bureau seeks public input on the costs, and benefits, and consumer protection issues related to savings features offered with prepaid cards.

Additional questions are in the ANPR. Do you have questions or comments of your own to share? We’d love to hear them.

Sign up for our email list and we’ll notify you when the comment period opens.

Here’s the recording of today’s panel and field hearing.