WASHINGTON—Despite the Consumer Financial Protection Bureau proposing sweeping changes to the prepaid market via 900-page rulemaking, one analyst thinks the bureau has overlooked an important issue.
Odysseas Papadimitriou, CEO of WalletHub and CardHub, contends the CFPB has failed to effectively regulate prepaid fees by not limiting their number.
“This is something I feel very passionate about,” explained Papadimitriou, saying too many fees make it difficult for consumers to find the best deal or even understand what they have signed up for.
“Let financial institutions charge what they want on each fee, but limit their number to five or six,” said Papadimitriou. “A product cannot have 30 fees—that is a product designed to deceive on its true value. Imagine going to buy a car and having to understand 30 different costs that could impact the vehicle’s final price.”
What Papadimitriou also thinks will be confusing to consumers about prepaid when the new rules take effect is classifying prepaid overdraft protection as an extension of credit, while checking overdrafts are not. Papadimitriou and other analysts think the CFPB will eventually classify checking overdrafts as credit.
Meantime, Papadimitriou said, consumers will remain confused. “From a consumer’s standpoint, checking accounts and prepaid cards are first cousins. To have two different sets of rules for products so closely related will confuse consumers, who already face financial literacy issues, the last thing we need is to make things more complex.”
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