Portman needs to stand up for users of prepaid cards
Posted May 04, 2017 in Op-Eds
Kalitha Williams is a policy liaison for Policy Matters Ohio.
Imagine not being able to pay bills or make important purchases because you cannot access your money. That’s what happened to RushCard customers in 2015. The RushCard is a prepaid debit card issued by UniRush LLC, based in Cincinnati. For nearly two weeks, its customers couldn’t get to their money. Fortunately for these consumers, the Consumer Financial Protection Bureau (CFPB) forced UniRush to return $10 million to tens of thousands of customers – including 17,000 Ohioans. To ensure this doesn’t happen again, the CFPB proposed regulations on prepaid debit cards. Even though many Ohioans would be protected, Sen. Rob Portman is trying to block them.
Congress created the CFPB in the wake of the Great Recession as part of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. Before that, there was no federal watchdog to protect people from predatory lending or bad financial actors. Thanks to the CFPB and its director, former Ohio Attorney General Richard Cordray, much has changed, including the new rule to protect prepaid card users.
Portman supports a resolution to use the Congressional Review Act (CRA) to rescind an important rule meant to protect people who use prepaid debit cards. Passed in 1996 under Speaker Newt Gingrich, the CRA allows Congress to put a stop to new federal regulations they oppose.
The CFPB issued the rule after four years of research and engagement with the financial services industry, consumer advocates and other stakeholders. It protects prepaid card users the same way the law protects customers with traditional bank and credit card accounts. The rule protects prepaid card customers against unauthorized transactions. It provides assistance if their cards get lost or stolen. The rule also mandates "Know Before You Owe" disclosures for prepaid accounts so consumers have clear, upfront information about fees and other details.
It makes sense to have a pragmatic prepaid card rule that protects users from financial abuse. So why is there is there an effort to roll back this protection? Because prepaid debit card companies make hundreds of millions of dollars in fees from disadvantaged communities that have little recourse against them.
A man pays with a credit card in a Wal-Mart Ekono supermarket in Santiago, Chile. Some people make a hobby of juggling multiple credit cards to maximize rewards; others just want simplicity. If the idea of chasing credit card rewards as a pastime doesn’t appeal to you, using just one credit card is a reasonable choice. (Photo: Associated Press file)
Prepaid debit cards are used primarily by the unbanked and underbanked – the 24 percent of Ohioans who do not have bank accounts or regularly use alternative banking services like payday lenders. Ohioans living in rural areas far from banks or credit unions are more likely to fall into this group as are immigrants and Ohioans of color. This group also has a larger share of residents who are younger or have disabilities, low incomes and less education. Employers such as Walmart and Kentucky Fried Chicken often use prepaid debit cards to pay wages as do some government agencies for programs like Social Security.
The CFPB has significantly improved the lives of people across Ohio and around the country. Since its inception, it brought nearly $12 billion in relief to 29 million consumers who have been wronged. Yet many in the financial industry and their political allies consistently attack the CFPB and Cordray. The industry has lobbied Congress for lax financial regulation. The CRA attempt to rescind the prepaid card rule is latest of those efforts.
If the 2008 financial crisis showed us anything, it’s that consumers need a strong and independent regulator to look after their interests. Ohioans need the continuing benefits of an effective consumer watchdog. So far, Ohioans filed over 23,000 complaints with the agency. The CFPB has been that advocate. Portman needs to stand up for Ohio consumers, instead of Wall Street banks that take advantage of the financially vulnerable.
Original Article: http://www.cincinnati.com/story/opinion/contributo...