NEW YORK (MainStreet) —The Center for Financial Services Innovation is proposing a standardized fee box be utilized by prepaid debit card providers in an attempt to make the industry more transparent.
The advocacy group debuted several potential versions of these disclosure boxes in a white paper released Thursday, and all of these versions list each fee associated with the card by category. These categories include costs associated with setting up the card, getting cash, spending money or obtaining information. The boxes also specify that additional fees may be incurred via a third party.
Our favorite version, picture above, also lists the amount the average cardholder is likely to pay out in a particular fee each year in an attempt to make it easier for consumers to comparison shop.
Prepaid cards, essentially debit cards that are not linked to a checking card, have been widely criticized for offering high fees and low incentives to the “unbanked” or “uncreditworthy.” As we have reported, they can also be notoriously hard to compare because fee structures often differ from provider to provider and consumer to consumer, depending on how the card is being used.
According to CSFI, prepaid provider Green Dot has agreed to use a version of this box on its card package starting this fall and online provider Plastyc is developing a version to be included with its offerings as well. Ready Credit Corporation has agreed to evaluate the effectiveness of a model fee box later this year.
"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 press release. "A well-designed fee box can help them make informed choices. By developing a simplified and standardized format, companies will ultimately attract more consumers to prepaid cards."
But these forms don’t always have to be proposed by the CFPB to have an impact. Last year, the Pew Health Group developed simplified checking account disclosure forms, which were ultimately adopted by Chase, the North Carolina State Employee’s Credit Union and the Pentagon Federal Credit Union.
In its paper, CFSI also called on regulators to improve disclosures and other consumer protections for prepaid cards in general. The CFPB has said it will include prepaid debit cards in its list of larger participants that fall under its supervision.
While the sample disclosure boxes do a great job of conveying the costs associated with prepaid cards, we would also suggest prepaid agreements include information on how some of these fees can be avoided. You can find examples of how to circumvent fees commonly associated with prepaid products in this MainStreet article!