Three major issuers of prepaid debit cards said Tuesday they will test a new fee-disclosure box designed to help people understand the costs of using cards to access their money.
The disclosure box, designed by a non-profit group focused on people who don’t have bank accounts, aims to improve the transparency of the increasingly popular cards. Prepaid cards are similar to debit cards but are not attached to an underlying checking account.
The Center for Financial Services Innovation also called on regulators to improve disclosures and other consumer protections for prepaid card users.
“Consumers need to be able to easily determine the true cost of a prepaid card and compare different products before deciding which to purchase,” said David Newville, CFSI’s policy manager, in a statement. He said a standardized disclosure “will ultimately attract more consumers to prepaid cards.”
CFSI is funded in part by banks and other financial companies that sell financial products and services to people who don’t have bank accounts.
The companies testing the fee disclosure are Green Dot Corp., Plastyc Inc. and Ready Credit Corp. Green Dot, the biggest publicly traded issuer of prepaid cards, said it will add the box to its card package this fall.
“Consumers should not have to worry about surprise fees hidden deep within cardholder agreements,” Green Dot CEO Steve Streit said in a statement.
Prepaid cards have been criticized by consumer advocates because some of them carry higher fees that what banks charge for comparable services. However, research funded by the prepaid card industry has found that prepaid card users often pay less than people who have checking accounts with low balances.
Prepaid cards are regulated separately from debit cards. They do not always offer the same protections against fraud and theft that credit and debit cards do.
The Consumer Financial Protection Bureau has the authority to write rules governing prepaid cards. The agency, created under the 2010 overhaul of financial rules, regulates broad categories of consumer financial products and services.
The bureau is considering adding prepaid card companies to the list of industries that it can monitor and supervise on-site, according to a public notice published last year.
In its release, CFSI called on the bureau to “do consumer testing of prepaid disclosures.”
A bureau spokeswoman declined to comment on the proposed fee disclosure or on any agency plans involving prepaid cards.
CFSI president and CEO Jennifer Tescher is set to testify Wednesday at a Senate subcommittee hearing about prepaid cards.