Democratic Reps. Back Prepaid Overdraft in Letter to CFPB
Consumers without emergency savings or traditional banking services could suffer under proposed prepaid rules from the CFPB, according to a letter from three Democratic representatives to the head of the agency.
In a letter dated April 15, Ruben Hinojosa, from the Texas 15th district; Joyce Beatty, from the Ohio 3rd; and John Carney, from Delaware’s at-large district, tell CFPB director Richard Cordray that the application of “credit card regulations, namely Regulation Z, to all overdraft features of prepaid cards” would leave some consumers vulnerable. The CFPB’s proposed rulemaking on prepaid accounts doesn’t explicitly ban overdraft. However, many experts believe the rule’s provision that any credit feature, including overdraft, associated with a prepaid card would trigger CARD Act and Regulation Z credit protections, which would make it too onerous to justify offering such a feature.
The letter urges the CFPB to carve an “exemption for small-dollar overdrafts” for consumers. The letter is positive for the prepaid industry and comes after NetSpend, a prepaid financial services provider, brought cardholders from five states—California, Missouri, North Carolina, Ohio and Texas—to meet with three unspecified Congressmen and staffers about the future of prepaid and the need for optional overdraft on prepaid. Last October several other senators and representatives expressed similar concerns on overdraft and others about the scope of the CFPB’s proposed rule and its implementation timeline.