Federal lawmakers started the new year by proposing legislation geared toward greater transparency, with bills mandating more disclosures for prepaid cards as well as information about companies that reach settlements with government agencies.
Introduced by Sen. Mark Warner (D-Va.), the Prepaid Card Disclosure Act of 2014 would amend the Electronic Fund Transfer Act to require that any application, offer, or solicitation must include a table of any fees that may be charged in connection with the account.
The information must be “easily understood by the consumer,” “clearly and conspicuously displayed to the consumer before purchase,” and include, at a minimum, the amount and a description of each fee that may be charged in connection with the account by the financial institution.
Consumers must also be provided with a toll-free number and a website where they can access the fee disclosure.
The bill grants rulemaking authority to the Consumer Financial Protection Bureau to create a format for the fee table and the possibility to mandate the use of a QR code or other technology allowing electronic access to the disclosure information.
Certain types of cards would be exempt from the legislation, including nonreloadable, general-use prepaid cards with a value below $250 and store gift cards, among others.
Sen. Warner’s bill largely tracks the previously introduced Prepaid Card Consumer Protection Act, sponsored by Sens. Robert Menendez (D-N.J.) and Richard Blumenthal (D-Conn.). That legislation contains similar disclosure obligations but would additionally require a “wallet sized” summary for consumers.
The proposed law would provide FDIC insurance for the cards and prohibit certain fees, including charges for inactivity, account closures, balance inquiries, and overdrafts. Financial institutions would also be required to close accounts and refund any balance to consumers after 12 months of inactivity or upon request of the consumer.
Sens. Elizabeth Warren (D-Mass.) and Tom Coburn (R-Okla.) also introduced a law promoting greater transparency, albeit in a different setting. Criticizing the $17 billion in tax credits given to banks that reached a $25 billion national settlement in 2012 with federal and state officials, the lawmakers proposed to shine the light on the details of other government settlements.
Pursuant to the legislation, federal agencies would be required to post online in a searchable format a list of all settlement agreements – civil or criminal – where the defendant paid more than $1 million. The bill would mandate the listing to include information like the total settlement amount, a description of the claims, the names of the parties, and whether the payment amount was to be considered tax-deductible.
Public companies would need to describe in their annual and periodic Securities and Exchange Commission reports any claim filed for a tax deduction relating to a payment under a covered settlement.
The legislation does include an exception for deals subject to confidentiality agreements, but the relevant agency would still have to issue a public statement about why the confidential treatment is necessary.
To read S. 1903, the Prepaid Card Disclosure Act, click here.
To read S. 1867, the Prepaid Card Consumer Protection Act, click here.
To read S. 1898, the Truth in Settlements Act, click here.
Why it matters: If either of the prepaid card bills becomes law, financial institutions and prepaid card issuers would face a host of new requirements; similarly, if the settlement bill took effect, companies reaching deals with the government would face heightened scrutiny. For now, all of the proposed bills remain in the early stages of the legislative process and their chances of passage are unclear. Regardless of either bill’s passage, the CFPB is expected to write rules by the end of this year, setting forth industrywide standards on fee disclosures, overdrafts and limits of cardholders’ liability in the event a card is stolen.