skip to main |
skip to sidebar
CFPBs Prepaid Debit Card Rules Will Harm Low-Income Consumers
From John Berlau of CEI.
"Today’s action
by the Consumer Financial Protection Bureau to issue unprecedented
burdens on providers of prepaid debit cards shows why the bureau needs
to be held accountable to our elected representatives. This lack of
constitutional accountability is why CEI, in partnership with the 60
Plus Association seniors group and the tiny Texas community bank the
State National Bank of Big Spring, is challenging the structure of the
bureau created in the Dodd-Frank legislation of 2010 in a lawsuit to be heard before the D.C. Circuit on November 19.
Though the CFPB says and many of the fawning headlines say the regulations are simply about consumer disclosure, the CFPB proposal—set
to go into effect after a brief 90-day comment period—actually would
subject prepaid cards to more stringent rules than checking accounts. It
takes the very radical step of treating overdraft features on a prepaid
card as an “extension of credit.”
Under the new rules, as described by the CFPB proposal, ”prepaid
cards that access overdraft services or credit features for a fee would
generally be credit cards.” But, as noted in news articles on the
proposal, most of the lower-income consumers are getting prepaid credit
cards in place of debit cards and checking accounts. As Time notes, “almost 80% of unbanked households with prepaid cards used them to make everyday purchases, pay bills, or receive payments.”
But under the CFPB, an express “ability to pay” rule would be added
that is absent from checking accounts with overdraft features. This
means another option lost by many of the unbanked.
And why have there been so many unbanked in the past few years? In
addition to economic woes that big-government policies caused and have
failed to solve, the Durbin Amendment of Dodd-Frank decimated free
checking for low-income consumers by capping what debit card issuers can
charge retailers for debit card processing. This shifted the cost of
infrastructure costs like preventing hacking to consumers.
George Mason University Law Professor Todd Zywicki, now chairman of the Competitive Enterprise Institute's board of directors, has found that the Durbin Amendment bears much of the blame for more than 1 million consumers becoming unbanked over the past few years.
If CFPB Director Richard Cordray were really concerned, as he says
he is, that prepaid card consumers are “some of the most economically
vulnerable among us,” he would push to repeal the Durbin Amendment
instead of putting forth the proposal today to limit further those
consumers’ options."
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.