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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.

  • Chris

    I. Love. It.

  • Jay

    The model forms look great! But more importantly, it’s a start
    in the right direction forward to establish a level of standardization.

  • graffosu

    Visually I really like version 1. I love the idea to make it uniform!

  • Raheem Davis

    Great post! Model 1

  • Banking Compiance Spec.

    Model 1 is the best. You should also place a maximum fee that card companies / banks can charge for these cards.

  • christiane eid

    I love Model 1 because it is easy to read and not intimidating. It has a simple layout. And the rest of the fees should be state that clearly as well. Keep it simple is the goal for consumers. Keep up the good work and thank you

  • JSB

    Model 1 is a better presentation of the key information. Straightforward, no embedded sales pitch mentioning proprietary services. Setting a fee cap isn’t a good idea. Better to disclose and let the consumer pick the deal that’s best.

  • Jennifer Wright

    I love them both! What about combining them- use the large fees above as in Model 1, with categories for the remaining fees as in Model 2? Not sure if that would be too cluttered, but I really like the idea of giving those other items a little organization.

    Thanks for all you do for us!

  • Laurie

    Model 1 seems most readable and straightforward. Good start for helping consumers.

  • Lucy Van Pelt

    Are all the commenters here CFPB employees? Or just most.

  • Allison

    Personally, I prefer Model 2. I like the segregation by category – you can either read down thru individual fees or search by a specific topic. While the bolding is nice on Model 1, I would still vote for the categories. Maybe carry the bold / larger font concept across to the monthly fee (as that will affect every card holder) for Model 2?
    The information is clear and easy to understand – and will be much easier for consumers to compare important features/fees between different issuers.

  • Consumer X

    These model forms are not that much different from ones shown above in the market place. Most consumers who purchase prepaid cards do not read all of the disclosure and fee information anyway. CFPB is spending WAY too much time on disclosure uniformity. In the end, just more cost for issuers to conform, which in turn translates to higher consumer cost for the product.

  • Lee

    The form should clarify whether the inactivity fee is in addition to or in lieu of the monthly maintenance fee.

  • Sharon

    What is the deadline to comment on these model disclosures?

  • Rachel

    Much cleaner and easier to read.

  • jrwells5

    I’m trying to understand why the CFPB is proposing uniform disclosures for prepaid debit cards when it has not first proposed uniform disclosures for depository accounts and related debit cards at insured depository institutions.

    • JSB

      Probably because prepaid debit is an easier product with fewer variables to work on. And they don’t have any disclosure regulation at the federal level (for deposit accounts there is at least the Truth in Savings Act and Regulation DD).

  • Tami Farrow

    This is a great step forward for the industry. My preference is form 2 as quite often the devil is in the details and this form allows for some additional detail around the fee. The limits assigned to certain transactions can be as important as the fee itself (for example, high load cost but low load limits).

  • Jeff

    Model Form 1 Is really great.

  • VVM

    I prefer model # 2. I like how it is laid out much better.

  • A Alannes

    The problem with both of the model forms is that they only work for cards with one payment plan option. Two of the screenshots in the article offer the consumer the choice of 2 or 3 fee plans. If the CFPB forces a cookie-cutter fee box, I fear that the prepaid card companies will be forced to restrict consumer choice.

  • Ali

    I vote #2. I really like the format and clarity.

  • Jackie Doorn

    I disagree with any “inactive fee” prepaid money should be an asset and personal savings. I would also take it a step further and require a QR Code. All smart phones have the ability to photograph the code that will take them right to the account agreement document web site. Availability and ease to read the fine print at the kiosk point of purchase will provide clear and concise information for the consumer. Jackie Doorn actively seeking employment.

  • JM

    Neither model is preferred as they do not contain sufficient details and there will be too many exceptions. Making an informed decision requires full disclosure. The cards I have used offer different plans. These two templates do not allow for multiple plans for a consumer to compare and select from.

  • Bob

    I know you guys mean well, but both of your proposed models are bad and will ultimately harm consumers. The photos show several cards that describe their fees in detail, explaining the requirements and exceptions. That is helpful. Neither model allows for any explanation in the box other than an asterisk. That means all the detail that you need to make an informed decision is somewhere else, probably inside the package. How does that help consumers? If you force providers to use these models, they will just change their fee structures so that they can put $0 with an asterisk in every box and then consumers will be left with absolutely no information.

    I also don’t like that the box doesn’t allow programs to offer consumers a choice. Two of the products shown allow the consumer to choose between a no monthly fee/pay per transaction program and a monthly fee/lots of included transactions option. I think choices are good for consumers. Because neither of your models allows providers to offer such choices, both of your proposals are bad for consumers. One of the reasons I like prepaid card programs and have tried several of them is because of the innovative services and fee arrangements. Your proposal would force providers to make all their programs the same and would diminish consumer choice.

    I am perplexed by some of the language on your model disclosures. Both say “Until you register your card, your money is not protected.” That is absolutely untrue. I think what you mean is that until you register your card, you are not covered by deposit insurance because the FDIC requires the provider to know the identity of the cardholder who benefits from the insurance. But that doesn’t mean that the consumer’s funds aren’t protected. Providers and networks do a lot to protect consumers from loss and fraud even if they haven’t registered their cards. Your proposed models spread disinformation which I thought was what you guys were supposed to be fighting against.

    One consumer group came out with model disclosures like two years ago and another one announced theirs in the last month. Both models have providers who have adopted them. You guys are really late to the party and I don’t see how your proposals advance the cause at all.

    • Larry

      Finally, someone in this forum telling the truth! Thanks, Bob. Agree with most of what you said. The one missed thing is that if the card isn’t registered, it is just like losing cash, you have no protection; it wasn’t coming from the FDIC insurance side of the equation.

    • Frustrated Banker

      I completely agree. I may be a Banker, but I am also a consumer. Sure, when you actively ask someone to look at the disclosures, they will tell you which one they like the best. However, how many consumers actually read the disclosures? Do you really think that mandating the use of model disclosures for prepaid cards is going to help the consumer? I agree that fees should be fully disclosed, we don’t want any UDAAP violations out there, unintentional or otherwise. When purchasing a prepaid card, most consumers are looking for how much it will cost them to initially load the card and whether or not the card is reloadable. This information is usually on the front of the packaging! CFPB, if you want to mandate something, just enforce full disclosure – don’t put us through the time and expense to use model disclosures that the consumers aren’t going to look at any way!

  • MsCatsMeow

    I like Model Form 1 the best. The most pertinent is very clear and easy to read.

  • Arnie

    I like Model form 1. It clearly shows what the fees are and gives you reason to pause if you really want to get one!

  • LN

    Prefer Form 1

  • Vern

    Model Form #1 is direct and quickly directs your attention to the most important fees. I prefer this one.

  • Jessi

    I like Model 1 for the visual appeal.

  • buggs

    Model 1 will work. Model 2 will be a bit confusing to some consumers.

  • buggs

    By the way, it would be nice to see something along these lines for gift certificates too.

  • andrea

    Model form #2 is great. It coorelates the fees to how the card would get used.

  • Susan

    I like the layout of Model 1. However, I do agree with some of the posts below. Consumers, and I’m as guilty as anyone, do not read disclosures, be it for prepaid cards, accounts, or loans, unless something goes wrong after the fact. That, I believe is the problem more than the layout of the disclosures.

  • Alyssa

    Would these disclosures be required for bank-issued non-reloadable gift cards?

  • Wanda

    I agree with the need for standardization and vote for Model Form #1.

  • Caro

    I think the second version is clearly marked (ie. When you make a payment, when you load the card, etc.) and is the easier format to make standard. Since most other charges will be outlined with the company through some other enclosed packaging slip, that one could be used easily to explain how the prepaid card works and define the costs all at once.

  • Chris

    Model form 1!

  • HappyGilmore

    Why not just require all fees to be disclosed, rather than directing to enclosed material and website for more instructions? Neither of your forms provide clarity, 3 or 4 asterisks with unclear fees. The examples of the 4 cards all offer better clarity and explanation than either of your models.

    You guys have brought nothing to this that provides consumer protection.

    • Sam

      Right. Fees that can be charged for simply buying the card without any further action on the part of the consumer should also be disclosed next to the price. So-called “monthly” fees that are charged against a card within hours, even minutes after buying a card, without even using it need to be considered part of the purchase price and not hidden-on the packaging or anywhere else.

  • vjcj

    The forms are very simplistic and clean, and understandable. However, there are a number of other plan choices that are represented in the samples you purchased and they have not been represented in your layout. Consumers are smart enought to understand they have payment and usage choices and all of those option should be disclosed when they are offered. Just like a cell phone contract, before you purchased you read and had to understand what your plan options were. The cards are not a one-size-fits-all product either.

  • truth

    Model 1 is best. Oh, and its hilarious how many banking industry profiteers lurk on these discussion boards.

  • jpc compliance

    Model 1 is better for drawing the consumer to fees in importance. I don’t understand the “protected” verbage… protected by who the issuer or government?
    I’ve tested these cards – leaving less than the inactivity balance will incurr roll over fees the following month which causes less money available for next transaction (assuming you load the exact amount you need) to pay a bill. I would like to see that explained better for the average consumer.

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