General purpose reloadable (GPR) prepaid cards, also called GPR prepaid accounts, are a versatile financial tool for consumers. They can be loaded via direct deposit or with cash, and used at ATMs to withdraw funds and at merchants to make point-of-sale purchases, similar to debit cards tied to checking accounts. They can also be used to budget or control spending.
In its 2013 national survey, the Federal Deposit Insurance Corp. (FDIC) found
that 8% of U.S. households were “unbanked,” meaning they did not have a bank account—and of those, 22% had used GPR prepaid cards in the previous 12 months. By comparison, the survey found that only 5% of those with a bank account had used these cards.1 Especially for the unbanked, the cards often serve as a primary transaction account.
Problems:
Due to loopholes in the predatory too-big-to-fail banking system as well as wage stagnation for the last three decades, families have recently turned to prepaid debit cards as a means to manage their daily finances. Unfortunately, there is just as many predatory loopholes and hidden fees in the prepaid debit card industry.
Recently, private employers and state governments have turned to payroll cards as a way to save money instead of printing checks or in case employees don’t have bank accounts. Although there may be more regulations for payroll cards than general pre-paid debit cards, there is still predatory banking by some employers and payroll card companies.
Solutions for prepaid debit and payroll cards:
- Limit purchase price to $5
- Limit reloading charge to $1 per transaction
- Limit monthly fee to $1
- Limit overdraft fee to $10
- Opt out provision for over draft protection
- Make ATM balance inquiries free
- Prohibit fees for in-network deposits
- 2 free out-of-network deposits per month, then $1
- Prohibit legal processing fees
- Prohibit inactivity fees
- Require all fees to be visible and on the outside of packaging
- Require pre-paid issuers pool funds into FDIC insured banks within 24 hours of a deposit
- Close Electronic Fund Transfer Act loopholes for Regulation E
- Prohibit pre-dispute binding arbitration clauses
- Strengthen liability coverage for stolen cards, lost cards, transaction errors, fraud and mis-charges
- Issuer must provide 30 days notice to any policy changes and fees
- The first three telephone calls to a live customer service representative per pay month
- No fees for the application, initiation, loading, participation or other fee to receive wages or to hold the card (Payroll-Model-Law)
Federal Reserve Bank of Philadelphia – The Scope of Regulation E Now Covers Payroll Cards
Wikipedia – Electronic Fund Transfer Act
Truth Out – Six Ways the Big Banks Are Getting Back-Door Bailouts
Truth out – Overdrawn and Overworked: How Banks Are (Still) Screwing Consumers With Overdraft Fees
NBC – The truth behind Suze Orman’s new debit card
CBS – Don’t get burned by prepaid debit card fees
Huffington Post – Debunking Myths Surrounding Reloadable Prepaid Cards
Huffington Post – Prepaid Cards Double As Student IDs On College Campuses
Huffington Post – Why Prepaid Cards and Gift Cards Are Not the Same
The Guardian – RushCard disruption reveals why prepaid debit cards should not exist at all
Slate – Why We Should Be Talking About Russell Simmons’ RushCard Fiasco
Slate – Facing public outrage, the Kardashians cancel their especially sleazy prepaid debit card.
Pew – Pew: Consumers Without Banks Use Prepaid Cards Like Checking Accounts
Pew – Survey of motivations and views of prepaid card users
Pew – Prepaid Accounts Under the Electronic Fund Transfer Act
Pew urges CFPB to finalize prepaid card rule
Pew – What Do Consumers Without Bank Accounts Think About Mobile Payments?
PR Newswire – Pew: Consumers Without Banks Use Prepaid Cards Like Checking Accounts
Salon – Pre-paid card users, under scrutiny, find tax refunds frozen
Salon – Worst rip-off since banking fees: Behold an infuriating money-sapping scheme
New York Times – Prepaid Debit Cards May Augment Bank Accounts
New York Times – Paid via Card, Workers Feel Sting of Fees
New York Times – Workers Paid by Card Will Gain Protections in New York State
Consumer Financial Protection Bureau – CFPB Proposes Strong Federal Protections for Prepaid Products
US PIRG – Banks Skim Millions in Fees from Student Aid Using Debit-Card-Linked Student ID’s
US PIRG – U.S. PIRG Urges Further Action on Campus Debit Cards
USA Today – Feds: Employers can’t force payroll debit cards on workers
National Law Review – Illinois Governor Signs Payroll Card Law
National Law Review – Payroll Debit Cards Could be Costly to Employers
Common Dreams – New Report Reveals Payroll Cards’ High Costs to Low Wage Workers
State payroll-card fees hit low-wage workers hardest
Think Progress – How A Giant Restaurant Conglomerate Teamed Up With Banks To Stiff Its Workers
Think Progress – After Ruling That McDonald’s Can’t Pay Workers In Bank Cards, The Bank Pays Up
Forbes – Are Hourly Workers Being Short-Changed? The Truth About Payroll Cards
Crain’s – Payroll-card rules should meet check-cashers’ standards
Eater – Are Payroll Cards Too Costly for Restaurant Employees?
McDonald’s Payroll Cards Broke Pa. Wage Law, Judge Says
Gothamist – Workers Who Get Paid With Debit Cards May Get Screwed A Little Less
Reuters – N.Y. attorney general probes payroll cards over fees
Chicago Tribune – Governor of Illinois signs payroll cards bill into law
Roosevelt Institute – Employers and Banks Bilk Workers with Payroll Cards
The Street – Consumers Warned of Hidden Fees Lurking in Prepaid Debit Cards
Hartford Business Journal – Connecticut Governor signs payroll card bill
Connecticut Authorizes Use of Payroll Cards to Pay Employees
The Nation – The Financial Firm That Cornered the Market on Jails
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