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Crafting Effective Regulation for the Prepaid Card Market
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Crafting Effective Regulation for the Prepaid Card Market

The Consumer Financial Protection Bureau should alter its proposed rule to make prepaid cards safer, more transparent, and more affordable.

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Nearly 10 million households used prepaid debit cards at some point during the previous 12 months, according to a June 2013 survey by the Federal Deposit Insurance Corporation, or FDIC. And more than half of the households using these cards are either unbanked or underbanked—meaning that they are among the millions of American households disconnected from the financial mainstream. Prepaid debit cards function similarly to debit cards that are connected to bank accounts: They enable consumers to make purchases in stores and online, get cash from ATMs, and manage their finances much like consumers who use checking accounts. Prepaid cards are also increasingly used in place of government benefit checks, paychecks, and other payments, though they have been scrutinized for high fees, a lack of transparency, and other drawbacks.

The different cards in a consumer’s wallet are subject to widely divergent regulations, even though they are used for similar purposes. Cards on which consumers receive government payments or wages have different consumer protections than general-purpose reloadable, or GPR, cards that are purchased in stores.

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