Are prepaid charge cards assisting or consumers that are hurting?

Are prepaid charge cards assisting or consumers that are hurting?

The middle for Responsible Lending is just a research that is non-profit policy company focused on protecting home-ownership and household wide range.

Why don’t we start out with the premise that is following when it comes to technology and therefore main item expenses, basic function reloadable prepaid cards are indistinguishable from debit cards connected with checkless checking reports.

Both prepaid and debit cards must keep a database of specific account documents; both access the exact same repayments system via a bank person in a funds transfer community such as for example Visa or MasterCard.

Both prepaid and debit cards have actually a requirement to “know your client” because the records must go through a bank to get into the re payments system.

Thus, the largest differences when considering prepaid cards and debit cards are distinctions perhaps perhaps not in technology however in legislation, or what exactly is frequently referred to as “regulatory arbitrage” in support of the unregulated providers.

Some situations of regulatory arbitrage between bank providers of checkless debit card reports and presently unregulated card that is prepaid include:

  • Debit cards have periodic written statements of account under Regulation E;
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  • Regulated debit card providers have actually mandated minimal capital needs;
  • Debit cards have actually customer protections for missing cards or card that is unauthorized; and
  • Prepaid cards are exempt through the Durbin interchange needs, at the least when it comes to smaller, rent-a-charter banking institutions. Read more