Prepaid debit cards will become subjected to tightened regulations proposed by the Consumer Financial Protection Bureau by October 2017.
According to Lauren Saunders, the associate director of the National Consumer Law Center, the standard of regulation for prepaid debit cards will match that of bank accounts and bank-issued credit cards in terms of loss compensation, fee disclosure, and overdraft fees. Saunders announced:
“The rules bring prepaid cards out of the shadows, with protections that in many ways are stronger than those for traditional bank accounts.”
Newly implemented regulations will impose:
- High overdraft fees on prepaid debit card users with credit lines
- Requirement for debit card providers to offer liability protection on par with bank accounts & credit cards
- Additional policies that would limit the efficient usage of prepaid debit cards
Prepaid debit cards have become increasing popular due to a rising number of users that weren’t eligible to establish bank accounts or credit cards.
Most credit card issuers demand a certain amount of minimum monthly wage in exchange for credit lines, to ensure that their consumers are capable of paying back their pre-made transactions.
However, because of the difficulty in setting up credit cards, many working class employees and workers prefer to use prepaid debit cards that are sold across the US, in places of their convenience or departmental stores.
The regulations of the National Consumer Law Center will deny the only two benefits of using prepaid debit cards, which are: elimination of overdraft fees and strict control of user funds.
If debit card issuers begin to impose $35 overdraft fees to hundreds of millions of prepaid debit card users, it will lead to an outstanding amount of fees that were previously unimaginable.
“Research shows many consumers turn to prepaid cards to control spending and to avoid overdraft fees,” said Nick Bourke, the director of consumer finance at the Pew Charitable Trusts.
The outrage of debit card issuers and users also led to the filing of a public letter, which states that the majority of banks and card issuers oppose the newly introduced set of regulations for the benefits of themselves and consumers.
“Prepaid Accounts are a valuable product used by a number of types of organizations to make a wide variety of payments. Prepaid cards are also used by the unbanked and underbanked consumers for specific purposes such as travel and remittances as well as an economical and convenient substitute for a traditional bank account,” read a section the letter.
“While there is much we can agree upon, the NBPCA has concerns with several of the policy positions taken by the Bureau in the Proposed Rule,” the NBPCA emphasized.
Alternative Solution: Bitcoin Debit Cards
Prepaid Bitcoin debit cards like the Bitpay Bitcoin ViSA debit card offers the exact same services as normal prepaid cards without any overdraft fee and subjective regulations. Users can simply top up their debit cards using Bitcoin and utilize card until the balance reaches zero.
More importantly, users can monitor balance on a mobile application, which provides consumers just enough control over their funds which the regulations denies.