New Jersey Senator Robert Menendez announced that he intends to introduce new legislation before the end of the Congressional session to regulate and eliminate certain prepaid debit card fees. The new legislation, apparently, will require improved and full disclosure of fees prior to purchasing a prepaid card.
In a press release on November 29, 2010, Senator Menendez (D NJ) announced that he will introduce legislation this session. The Senator also rode the wave of publicity surrounding the Kardashian Kard by asking the Kardashian sisters to “support his forthcoming legislation on prepaid debit card fees”. (the Senator obviously appreciates a PR opportunity when he sees one).
The announcement of the upcoming legislation came with a copy of a letter the Senator sent to Elizabeth Warren, the interim head of the new Consumer Financial Protection Bureau. In the letter, Senator Menendez offers to work with Elizabeth Warren and the Consumer Financial Protection Bureau to “properly regulate this industry and if necessary to develop legislation to protect consumers without stifling competition. Please feel free to contact me or my staff on this important issue as we move forward.”
In his press release, the Senator claims that “For too many consumers using prepaid debit cards, Black Friday may have put them in the red because of surprise and unreasonable fees.” (referring to Black Friday, the big shopping day after Thanksgiving).
Are prepaid cards really that bad? Sure, the Kardashian Kard was arguably a poorly executed launch of a product. However, the Kard came with relatively clear terms and conditions. Consumers signing up for the card were presented with a full set of fees and a typically verbose set of terms and conditions. Is regulation going to make those terms and conditions any less dense?
We believe the cream rises to the top. There are a number of excellent prepaid cards on the market whose terms and conditions and fees are about as clear as a financial product can get. For example, the Mango MasterCard has one of the easiest and clearest set of fees possible in a financial product.
These cards serve an important purpose for many people – they replace bank accounts which may be out of reach for many (either because they are on ChexSystems, or because “traditional” checking accounts are not available to them).
The alternative, for many people, is to frequent check cashers or to use money orders to pay their bills. Those products have some pretty simple fee structures – which essentially boil down to paying tons of money.