Durham, NC: Field Hearing on Prepaid Cards


Good morning. Welcome to Durham. Welcome to
the 4th Congressional District. In case you didn’t know, that’s where you are. Welcome
to this gathering that I think will be of great profit and great interest to everybody
concerned. We are very, very glad to welcome you here. I am David Price, the 4th District
Congressman. It is my privilege today to kick off this meeting. We are proud to welcome the Consumer Financial
Protection Bureau Director Richard Cordray to the Triangle today and also his CFPB team,
a number of people working with him as this Bureau gets up and running. I have told him that the Bureau could not
have chosen a more appropriate place to host a field hearing than Durham, North Carolina,
and the Triangle region of North Carolina. Durham is home to a community of consumer
protection and empowerment organizations, with a long tradition of education and advocacy,
and, of course, our region is also home to a number of outstanding financial institutions. We all take considerable pride in the successful
efforts of Durham’s consumer protection financial reform organizations to influence national
policy, and I can tell you that’s a process that began well before the 2008 financial
crisis. My only regret today is that because of a month’s long commitment to the UN Association
of Western Triangle, already been postponed once, I simply have to join them at Carolina
Meadows at one o’clock, so I am going to have to leave fairly, fairly quickly. But I do
appreciate the chance to visit with Mr. Cordray and to welcome all of you here and to launch
this discussion. Strong consumer protections are vital to our
economic security and to this country’s continued recovery. Unfortunately, it wasn’t until our
nation was faced with an economic crisis, largely brought on by abusive lending, by
deceptive financial products, by unchecked financial speculation on Wall Street. We all
know the accumulation of problems that led to the economic collapse and a very, very
painstaking recovery. It’s in the wake of this that we have finally
established a Federal agency specifically dedicated to the oversight of financial services
and products on behalf of the average American consumer. As everyone here knows, the landmark Dodd
Frank legislation passed last Congress created this Bureau. Unfortunately, the opponents
of financial regulation or reform opposed this agency from the beginning and have erected
obstacles to its effective functioning ever since. Fortunately, Director Cordray and his
team are in the process of overcoming those obstacles, and in a very systematic and professional
and I think fair and open way are establishing this Bureau, establishing the rules of the
road, and reaching out to stakeholders on all sides to make sure that we have all the
ideas thoroughly vetted, that we don’t expect perfect agreement, of course, but that we
do have a sense that this has been a participatory process and one that is fair and open and
that in the end will establish rules of the road that will benefit the consumer, will
actually benefit the financial services industry. Rules that we can all live with will create
a greater sense of fairness and legitimacy for the entire system. That’s the goal, and
I do think the way Director Cordray and his team have proceeded is consonant with that
goal, is consistent with that kind of approach. We know that his confirmation was delayed
for far too long because of, frankly, outrageous abuses of Senate procedures, by some who were
opposed not to him particularly but to the very mission of this Bureau. So it wasn’t
until the President used his recess appointment authority that Director Cordray was finally
installed as Director earlier this year, but, as I say, the progress since that time, I
believe, has built confidence and has helped us overcome some of the turmoil of that earlier
process. I certainly hope so. We still struggle, though. There has been
legislation passed. There have been funding cuts enacted, certainly funding cuts enacted
by one house that has promised to weaken this Bureau and to compromise its operations. So
we have a continuing struggle, I think a continuing responsibility in the Congress, to keep our
eye on the objective here and to certainly not detract from it but also to facilitate
the formation of this Bureau and its effective functioning. That should be the charge of
all of us, regardless of party, regardless of ideology, and I am very hopeful that we
can achieve that kind of cooperative approach and have here an agency that functions at
the maximum level of effectiveness. I think this kind of outreach here today,
this kind of input from all of you is critical to that from the agency’s point of view, and
so I’m grateful. For that reason, I am grateful for everyone being here and for the wonderful
participation we’ve had in putting this meeting together. I think it will be a very successful
one. I hope we can all take pride in the creation of this Bureau and also work cooperatively
to help it succeed. We have to work diligently to make sure our
consumers are well informed, make sure they’re protected. There is some very complex financial
products out there. There are potential abuses, we all know. So one of the areas that is going
to be the focus today is one that does need attention, the area of prepaid cars, the issue
of prepaid cards. It’s a very popular product. It holds promise for many consumers. It also
holds perils, and so there’s some risk involved, and we need to know. We need to know with
industry and consumer groups coming together, talking together, with the Bureau to discuss
the potential impact of these products, what rules of the road are warranted and are necessary
as these increasingly diverse products are launched. That’s the topic today, and it’s
one that I am confident we’ll make good headway on. So thank you all for being here today. Thanks
to Director Cordray and to his team for coming to North Carolina. I think we have a lot to
offer and will have a lot to learn. So thank you for being part of this, this gathering. [Applause.] MS. MARTINEZ: Thank you, Congressman Price,
for the gracious welcome. My name is Zixta Martinez. I am the Assistant Director for
the Office of Community Affairs at the CFPB. I would like to next introduce a figure who
is well known in North Carolina and nationally. North Carolina Attorney General Roy Cooper
is a strong voice for consumers from his early days in the legislature when he wrote the
nation’s toughest anti predatory lending laws to this year when he negotiated one of the
largest State civil settlements against national banks for foreclosure and lending abuse. He
is one of the State Attorneys General who advocated for Federal authorities to stop
unfair lending practices and to provide fair rules for consumers. We are very glad to have him here today. Welcome,
Attorney General Cooper. [Applause.] ATTORNEY GENERAL COOPER: It’s great to see
so many people here today and to get input from you on this important financial product.
I’m also very glad to be able to introduce my friend to you, the Director of the Consumer
Financial Protection Bureau, but, first, I want to welcome those of you outside of North
Carolina to North Carolina. We have been a leader in this country in consumer
protection. There’s so many people here who are national voices for looking out for people
who need protection from big banks, from financial companies, from scam artists, from those who
would take advantage of them. I see Martin Eakes and Peter Skillen and Chris Kukla. There
are so many others who have been here and who have been strong voices, because in North
Carolina, we did have the first anti predatory lending law in the country. We did run payday
lending out of our State. We have worked hard [Applause.] ATTORNEY GENERAL COOPER: We have worked hard
for fair products for consumers, but the fight has been difficult, and the fight is far from
over. What’s important about today is that we have
a critical Federal partner here. In the past decade, for most of the time, not only has
the Federal Government been unhelpful, they have opposed efforts by the State and State
Attorneys General to protect consumers and to use their authority to make sure that we
do the right things for working families in North Carolina. But today, we have an organization here that’s
dedicated to doing that. It was a fight to get to those moment. There were consumer protection
elements in many Federal agencies. The problems were that none of these agencies put an emphasis
on consumer protection. So when we would get a complaint in our office that had to do with
a Federal regulation, whether it be a credit card or a bank issue or some type of Federal
loan that we couldn’t get at, many times we would send that complaint to Washington and
we’d never hear anything back. That’s why I an many others fought so hard
for the creation of the Consumer Financial Protection Bureau. This agency pulls together
all of those efforts into various agencies, and its one job is to look out for consumers
not only in North Carolina but across the country, and that’s what we are going to be
talking about today, is them being able to set up some rules in this and in other areas
to make sure consumers are protected, and that when we pick up the phone and call about
a problem with a North Carolinian, they will answer back. And not only that, they will
work with us and give us some authority to take action as well, because we fought for
this agency, but we wanted to make sure that the States could continue to work hard to
fight consumers and could work along with the Federal Government to make sure that people
don’t get ripped off, and that’s where we are today. Prepaid cards can be a very good thing or
a very bad thing. I think the purpose of the meeting today is to make sure they work for
consumers not only in North Carolina but across the country. So many people, millions of people
are outside the banking system, and when they get that paycheck or they get that small loan
or they get a check from their Aunt Sarah, they have to go down many times and pay large
fees to cash those checks. And then they are dealing with cash and having to keep up with
that. The fact that you have a prepaid card where
you could load these checks that you get and control it in a way that you can use it many
vendors don’t take cash anymore. So many consumers don’t have the option without that card. So
the purpose of today’s meeting is to make sure we tell the Consumer Financial Protection
Bureau what things we need to look out for to protect North Carolina consumers and consumers
across the country when we have these prepaid cards. I’ve seen some pretty good cards out there
that I think will work. I’ve seen some that are egregious in the amounts of fees and the
ways that they can trick consumers out of their hard earned money, so that’s what this
is about today. I, like Congressman Price, do have to be somewhere
else. I do have staff here that’s going to look at this. I have read the report that
you are going to talk about today. Rich, I have read all of your remarks, so I know exactly
what you are going to say, and staff is going to report back to me on everything that’s
said today, because I want to know. As Rich told me, this meeting was set up just a couple
of weeks ago, but I wanted to make sure that I put time in my schedule to be here. Now I get to do something fun and to introduce
my friend who is now the head of the Consumer Financial Protection Bureau. Rich Cordray
served as a State Representative in Ohio, as Ohio State Treasurer, as the State of Ohio’s
first Solicitor General, and where I got to know him was when he served as Ohio’s Attorney
General. Brilliant guy, five time “Jeopardy” champion, and I think, Rich, I think that
was when you couldn’t keep winning. I think they cut you off at five. He is an excellent
lawyer. He has this tremendous legal background, and when you look at his record as Ohio Attorney
General, you can tell that he cared about consumers in Ohio and across the country.
He took some bold actions to make sure they were protected. When I talked to Elizabeth Warren about who
should do this and talk with the President’s team, I thought that this should be the number
one choice, and he has certainly hit the ground running and has done an excellent job. The
President has put his trust in him in this important agency, and it is critical that
we give him the support that he needs to do this. Rich and I agree on a lot of things, but I’ve
had to tell him over and over again, Rich, Ohio is not first in flight. Sorry. [Laughter.] ATTORNEY GENERAL COOPER: I know the Wright
Brothers had that little shop up there, but this is where it happened. You just got to
remember that. This is where it happened. It is my privilege and pleasure to introduce
to you the Director of the Consumer Financial Protection Bureau and my friend, Richard Cordray.
Richard? [Applause.] MR. CORDRAY: I want to begin by thanking Congressman
Price for hosting us here in his district today, and I want to especially thank my friend,
Attorney General Cooper, who not only has been fighting for consumers for many years,
but when he was the president of the National Association of Attorneys General, which is
a real honor, elected by your colleagues, he made it a poin tin his presidential initiative,
which ran until last year, to work on developing the kind of relationship between the State
Attorneys General and the new Consumer Financial Protection Bureau, which will enable us, as
he said, to partner together, to draw on what for both of us is always going to be limited
resources to be most effective at fighting for consumers. And I’m glad to be working
with you, Roy, and our colleagues, my former colleagues and current colleagues, as I see
it, to do that, and we are pleased. I will say that North Carolina has always
had the advantage over Ohio that everybody from Ohio wants to come down here for spring
break, and just because the Wright Brothers did that years ago doesn’t mean we are surrendering
our claim to be first in flight. [Laughter.] MR. CORDRAY: So, in any event, thank you to
all of you for joining us today, and we look forward to a balanced presentation of the
issues. We love getting outside the Beltway. Congressman
Price asked me earlier. He said, “It’s great for you to come to North Carolina. I suppose
this is something of a distraction from your work and your team running the Bureau.” I
said, “No, we look at it differently. For us, this is what a welcome change, a great
relief.” Part of the reason why we want to do this job is to be able to come and speak
to people and listen to people who tell us exactly what consumers are experiencing and
so connecting with the people we work with and work for every day, which is each of you.
So we thank you for being here. Let me welcome you to our event today and
ask that you take a moment and begin by thinking about what life is like for people who find
themselves outside the banking system in this country. What is life like if you don’t have
a checking account, you don’t have a debit card or a credit card? Then suppose you could
not even qualify for any of these products, which is true of many people in this country.
How would you convert your paycheck into money you can spend? How would you go about paying
your bills? How would you keep your money safe at the most fundamental level? About 9 million American families find themselves
in precisely that situation. They are known as the “unbanked.” Some of them have been
locked out of the banking system after experiencing troubles with their accounts. Others have
never opened an account in the first place. Another 21 million families are the so called
“underbanked.” Although they actually have a bank account, they often use nonbank products
to meet their financial needs, and there’s a number of reasons for that. But these are just labels: “unbanked,” “underbanked.”
The tens of millions of Americans who bear these labels are just hardworking people living
paycheck to paycheck, like a lot of other people, and waging a constant struggle to
make ends meet. In recent years, many of these families have
turned to a relatively new type of product: a prepaid card. Consumers can load money onto
these cards and then use them for everyday purchases, just like a debit card or credit
card, but without having to be attached to an individual bank account. As the prepaid
card industry has grown, it has attracted a wide range of consumers. Some prefer to
use prepaid cards for online shopping. Others use prepaid cards while traveling. Still others
turn to prepaid cards as a budgeting tool, as is true, for example, of parents who send
their children off to college with a prepaid card. All of these consumers need, and deserve,
products that are safe and whose costs and risks are clear up front. Yet right now prepaid
cards have far fewer consumer protections than bank accounts or debit cards or credit
cards, and that is especially troubling, because the people who use prepaid cards are, in many
instances, the most vulnerable among us. Every dollar they pay in hidden fees is a dollar
they cannot spend on supporting their families or themselves. These consumers are least able
to take a hit if their prepaid card is lost or stolen, and yet they often have no guaranteed
protection against that kind of disaster. For these reasons, we are announcing today
that the Consumer Bureau is initiating a rulemaking process to address prepaid cards. We are launching
the process by reaching out to the public for feedback and insight. That’s why we’re
here. We will get your perspective at today’s field hearing, and we will solicit public
feedback through a formal comment process. In these ways, you will help us decide how
we should go about regulating prepaid cards to better protect consumers and to provide
clear rules for prepaid providers. At the Consumer Financial Protection Bureau,
we now oversee all consumer financial markets, ranging from mortgages to bank accounts to
credit cards to student loans and many others. In the grand scheme of this universe of financial
products and services, which is worth trillions of dollars, prepaid cards are not ye all that
large, but the product is growing by leaps and bounds at an expected, we’re told, of
over 40 percent each year from 2010 to 2014. The two largest program managers for prepaid
cards have reported a jump from 3.4 million active cards to more than 7 million active
cards in just the past 3 years, and industry analysts predict that at the rate things are
going, the total dollar amount that consumers will load onto prepaid cards will be nearly
$167 billion 2 years from now. Much of this growth is coming from consumers
who may be using this product as an alternative to a checking account by loading their wages
onto a prepaid card. For example, the largest program manager in the nation reported that
the direct deposit of funds increased by nearly 70 percent last year, and the second largest
program manager reported that 42 percent of its customers had signed up to link their
cards to a method of directly depositing funds. In fact, one of the reasons many consumers
choose a prepaid card is because the fees on the card may be lower than the fees they
have paid, especially when you include overdraft fees, on a checking account. Other consumers
like the fact that the majority of prepaid cards do not let them overdraw the amount
of funds available to them. So they use the cards as a budgeting tool. As the market for prepaid cards expands, it
is attracting new players. Some are large banks, and some are not banks at all. At the
Consumer Bureau, our authority is not limited solely to banks. It’s a great advantage for
us, and, in fact, we are working to level the playing field among all financial institutions
in order to protect consumers. The expanding prepaid market means that new
cards are entering the market constantly. These new cards sometimes come endorsed by
a celebrity spokesperson. From the Kardashian sisters to baseball stars like Alex Rodriguez
to the characters from the movie “Twilight,” none of whom I could name [Laughter.] MR. CORDRAY: we have seen all kinds of well
known people vouching for the benefits of prepaid cards or gracing the front of them,
but this kind of celebrity marketing can be an unhelpful distraction to consumers who
do not understand how the card works or don’t realize how different the various cards can
be, all of which makes it hard to tell whether a particular card is a good choice for their
financial needs. We feel we are at a critical moment right
now in the growth of the prepaid market. At the Consumer Bureau, our job is to do all
we can to ensure that financial products and services actually help consumers rather than
harm them. We want good practices to be instilled early on, so that as the market grows, it
does so responsibly. Clear rules in the prepaid market will help prevent the spread of low
road competition that hurts both consumers and the honest businesses that seek to serve
them well. Over the course of this rulemaking, we are
going to focus on two key issues: safety and transparency. We believe that innovation can
bring great benefits to consumers we have all seen that; we know that and can provide
those outside the traditional banking system with more access to financial products that
can meet their needs, but we have a duty to make sure that these products are safe for
consumers and that prepaid card managers do not make money by relying on tricks and t
raps and that are unsustainable for cardholders. Success in the marketplace is hollow if it
comes at the expense of consumers. Many of us have experienced a time where we
could not find our wallet or when we realized with a sinking feeling we had left a credit
card or debit card behind after making a purchase. Has it ever happened to any of you? It’s happened
to me, I can tell you. Others may have been victimized by someone who hacked into their
accounts and racked up unauthorized charges on their credit cards or debit cards. After
recovering from your anxiety or your anger, your next step begins to get you back on track,
calling your bank or your credit card company and reporting what has happened. For debit cards and credit cards, Federal
law determines what happens next. Your responsibility for unauthorized charges is limited. Also,
Federal law provides a framework for resolving errors and disputes about unauthorized charges
and ensures you have information on how to do so; in other words, the law provides considerable
security to debit and credit cardholders against unexpected losses. In contrast, prepaid cards do not have the
same legal protections, and we think many consumers don’t realize this. Although the
networks that process prepaid card transactions, such as Visa, MasterCard, American Express,
and Discover, do require prepaid card issuers to provide contractual protections to cardholders,
those protections are not as strong as those for debit and credit cards, and they are subject
to change at any time. That is why we are considering how best to extend protections
to prepaid cardholders in the event that a card is lost or stolen, unauthorized charges
are made, or a processing error results in an incorrect charge amount. Of course, even if the funds are secure, a
prepaid card can still be risky for consumers in other ways. If you do not know the card’s
fee structure, it is easy to rack up charges unknowingly, and some prepaid cards do allow
consumers to overdraw the money on the card and incur overdraft fees. So we are taking
a close look at the costs, benefits, and protections related to overdraft features offered on prepaid
cards. As part of our mission of making the markets
work for consumers, we often find that consumers do not have the information they need to make
sound decisions. This can also be the case with prepaid cards. Some prepaid cards have
a very simple fee structure, with only one or two fees. Others use more of a cafeteria
style approach to pricing, with separate fees being charged to load money onto the card,
withdraw money from the card, make a purchase, check a balance, or even call customer service.
That consumers can choose which type of prepaid card is best suited to their needs is potentially
an advantage, but that’s only true if consumers can compare products and their advantages
and disadvantages side by side. We have heard from one consumer who went to
check her balance on her prepaid card at an ATM and found that the balance was less than
she expected. After checking her balance again to confirm what she had thought was an error,
she called customer service. Unbeknownst to her, there was a fee for each of these actions,
and her balance kept dropping. We believe it’s important for companies to be up front
with consumers. If the company charges a fee for withdrawing money from the card or checking
your balance or calling customer service, then consumers should know about it. Unfortunately, consumers often do not have
this information until after they have purchased a prepaid card. Some cards will list major
disclosures on the exterior packaging; however, with other cards, the fees, terms, and conditions
that apply to the card are printed on an inner flap or in a magnificent origami pamphlet
located inside the package. [Laughter.] MR. CORDRAY: Hence, they go undisclosed until
after the card has been purchased. Today it is up to card issuers to decide what information
is disclosed and when and how. Another fact that is important for consumers
to know is whether funds that they load onto prepaid cards are protected by FDIC insurance.
When consumers place funds in a credit union or a bank account, they take comfort in the
fact that their money is federally insured, now up to $250,000 or more, but this guarantee
does not necessarily apply to money loaded onto prepaid cards, despite what many consumers
may think. Instead, companies that offer prepaid cards
generally pool all the money loaded onto their cards in a single account. Some issuers have
structured the pooled accounts in such a way that each of the cardholders does have the
benefit of FDIC insurance should anything happen to the bank, but others do not. And
there is no reliable data on how often this protection is provided, and there’s no requirement
that issuers provide this protection. Because consumers often have no way of knowing how
the banks are treating their money, we will consider how best to let consumers know about
the risks to the safety of their funds. So the Bureau is asking for input on how we
can make the costs and risks of prepaid cards clearer and more accessible for consumers.
We know this can be challenging when prepaid cards are sold in a retail setting in packages
where space is at a premium, but consumers need to know this information, so they can
make the comparisons necessary to shop around and reduce surprises by understanding the
true cost and the true nature of the product. In fact, we all recognize that for free markets
to work as they should, people need to be informed, so they are able to vote with their
feet. Without knowing the key terms of the card and without knowing them ahead of time,
it’s impossible for that to happen. We are also launching Ask CFPB Prepaid Cards
to help consumers understand this fast growing product. Ask CFPB is an interactive online
tool with easy to understand answers to some of the consumers’ frequently asked questions.
Ask CFPB Prepaid Cards includes more than 80 questions and answers from our staff experts.
These new entries give consumers an overview of prepaid cards and help address questions
about obtaining, reloading, and using prepaid cards. And by the way, you can go and see
these on our Web site at ConsumerFinance.gov, and if you see questions that you think should
be there but are not, you can suggest them to us. This is an interactive tool. And if
you think there is any concern or edits or issues with any of the answers we provide,
you can make those suggestions as well, and we will take those into account and make corrections
as needed or simplifications or whatever you may suggest. So, safety and transparency, these are, and
should be, important hallmarks of all consumer financial products and services. As part of
our rulemaking here, we will explore how best to extend these basic protections to prepaid
cardholders whose funds may be at risk. We are working to provide evenhanded oversight
of all of the consumer financial markets. We are committed here to a careful and constructive
rulemaking process based on broad input and grounded on all the data we can assemble around
these issues, and we welcome that from all sources. Your comments and ideas and those of everyone
else who takes the time to share their perspectives with us will inform our ultimate decisions
about how best to regulate prepaid cards in order to protect consumers. We look forward
today to a frank discussion and a productive result eventually both for consumers and for
the honest businesses that seek to serve them well. Thank you very much. [Applause.] MS. MARTINEZ: Thank you, Director Cordray,
for the remarks. At this time, I would like to invite all of
the panelists to the table. The CFPB’s Raj Date will lead our panel of experts through
presentations and Q&A. MR. DATE: Excellent. Good afternoon. My name
is Raj Date, and I serve as the Deputy Director of the CFPB. Thank you for the water, Director
Cordray. [Laughter.] MR. DATE: First, thank you for being here.
As Director Cordray just mentioned, we have, and we are privileged to have, a quite important
mission at the CFPB, and it is a mission that we take quite seriously. We are very serious
about what we do, but we are also serious about how we do it, and core to how we do
our work as the principles of being fact based and being transparent fact based and transparent
and that’s why events like this, a field hearing like this, is so important. It allows us to
get out of Washington, D.C., and be able to gather the experience, the expertise, the
insight of consumers themselves, of consumer and civil rights leaders from across the country,
as well as from industry participants of various business models and various sizes. It really
is a terrific opportunity for us to be able to do the work that we know to be so important
and to do it well. So thank you for being part of it. Why don’t I just start by giving a sense of
how it is that we’d like the rest of the program to work. I am going to introduce briefly our
two panels: first, over on my right, a panel of consumer and civil rights leaders; and
over on my left, a panel of industry experts. We will ask for brief remarks from each one
of our panelists. We will start starting with the panel over on my right hand side, and
we will take the liberty for myself and my colleagues at the CFPB to just ask a few questions
of the panelists at that time. Concluding, at the conclusion of both of the
panels’ remarks and Q&A, we will then open up the program to receive comments and statements
and experiences from those of you assembled here in Durham to get your perspectives on
the prepaid market and what your experiences are with respect to the product, product market,
and how it has grown and affected consumers themselves. As you will discover, as I introduce our panelists,
it is a group of people with expertise and credibility and the kinds of people that you
would like to hear from all day long [Laughter.] MR. DATE: but in a different and more accurate
way. We don’t have that time today, so I will ask that their remarks are brief. Let me first introduce everyone. You have
already met to my immediate left, Director Rich Cordray from the CFPB. To his left, you
have already met Assistant Director Zixta Martinez who leads our Community Affairs function.
To my right is Marla Blow, the Assistant Director for Card Markets. Starting over on the far
left hand, to my far left is Jeremy Kuiper, who is the Managing Director of the Payment
Solutions Group at Bancorp Bank. To his immediate right is Hyung Choi, the head of Prepaid Products
at Visa, and then Dan Henry, the CEO of NetSpend. Over to Marla’s right is Deyanira Del Rio,
who is the Associate Director of the Neighborhood Economic Development Advocacy Project, or
NEDAP; Adam Rust, who is the Research Director for Reinvestment Partners; and then finally
Mr. Martin Eakes who is the CEO of Self Help and the Center for Responsible Lending. So why don’t we begin with our consumer and
civil rights panel, and if you don’t mind, Mr. Rust, why don’t we begin with a brief
opening statement from you. MR. RUST: Thank you, Mr. Date. So I am Adam Rust. I am the Director of Research
at Reinvestment Partners, the author of “Bank Talk,” and the author of the recent paper,
“Eight Principles for the Reform of the Prepaid Debit Card.” So I want to be clear from the start that
we are advocating for the same standards across all payment systems, be it a checking account,
a prepaid debit card, or even mobile payments, and you can take one thing from what I’m going
to say today. It’s that consumers need accounts that are simply secure, affordable, functional,
and empowering, and let me tell you what that means. First, secure simply means a card that protects
consumers, and so that is a card without overdraft and a card without a line of credit. We know
that one of the main reasons that people come to you, the prepaid card, is because their
expectation is that you cannot overdraw your account, and yet there are cards today that
would contradict that expectation. I believe that when it’s appropriate, consumers should
have credit. I also believe that it is an excellent attribute that there is a product
in the market today where consumers can access the formal payment system, even if they don’t
have good credit. I think a secure card is one that comes with consumer protections,
and so it is really great that the CFPB has begun rulemaking on extending coverage of
Reg E to these cards, and I will further say that the cards should have FDIC insurance.
Secure means that the cards come with good disclosures. I will talk about that more later,
but, simply put, the disclosures need to be uniform, they need to be mandatory, and then
they need to be enforced. Affordable essentially does not mean that
a card has no fees, but it means a card where the fees are appropriate to the services that
you receive; in other words, that you get reasonable value. I have examples of such
products where the pricing is not realistic. If I lose my credit card, I can have it replaced
for free. If I lose my prepaid debit card, it might cost as much as $35 to replace it.
That’s not right. If I want to call customer service, for me it’s free. If I go to my checking
account of my credit card, it could cost $2 or $3 to call my prepaid debit card provider,
and that’s not right. Functionality is very important. Often functionality
is essentially tied to cost. Often when you use a card more, you pay less. I believe that
when a customer is told that their ATMs are free, but when it turns out that the card
company doesn’t have an adequate surcharge for ATM network, that’s not right. And then this finally all leads up to empowering,
which is the key, I believe. We want cards that can be a financial home today but that
can give people the opportunity to have a deeper financial relationship as their life
continues to go on. We want people to be able to build assets. We want cards with savings
accounts. We don’t want prepaid to be a dead end. So just in general, I’m going to close with
that, but I really think that we can make a good prepaid debit card. I think the product
has a lot of capability, and I am looking forward to seeing it become all that it can
be. Thank you. [Applause.] MR. DATE: Thank you. Ms. Del Rio? MS. DEL RIO: Good afternoon, and thanks for
having me here today. And I just want to echo others who have said how exciting it is to
see the CFPB in action in this way, and we are really pleased to be part of this hearing. I want to just tell a little bit about NEDAP’s
work on prepaid cards. We are an economic justice center in New York that works with
hundreds of groups, community groups and civil rights groups, as well as thousands of low
income New Yorkers each year, and we work with New Yorkers and organizations to promote
fair lending, to press for bank accountability to low income communities, and to work to
eliminate the array of predatory and high cost services that have proliferated over
the past decade or more in low income neighborhoods and communities of color as well as immigrant
communities. We became aware of prepaid cards starting
in the mid ’90s and have worked on this issue and tracked the many forms of prepaid cards
and issues associated with it since. One of the kinds of cards that we are talking about
today are these general purpose reloadable cards, which as you’ve heard are being touted
by many as substitutes for bank accounts and equitable substitutes for bank accounts as
a way to avoid the hidden overdraft fees that trap so many people over recent years who
had bank accounts and actually expelled many people from the banking system when they couldn’t
repay those overdraft fees and got listed on check systems and other black lists and
then were unable to get back into the banking system, right? And so the appeal of these cards for many
makes sense, right? We hear that they are easy budgeting tools. It’s a way to sort of
serve as a stepping stone into a mainstream bank or other services. Unfortunately, in
our experience working with groups and New Yorkers who have used these cards is that
the rhetoric has not come close to matching the reality, and that these remain an inferior
and more expensive way of doing your banking than using a traditional account. So the laundry list of high fees that prepaid
card users are often hit with are well known. We typically see people paying $25 to $50
a month just on ATM fees and to swipe their card at stores to make purchases. The inferior
protection, the lack of uniform protections has been addressed, which apply to other types
of cards. One of our broader concerns and one that I
hope we can think about as we look at this market is also about whether this is actually
serving to bring people into mainstream regulated financial systems or if it’s a wedge that
is keeping people out, and I think that’s a really important question to ask in addition
to product features and costs and things like that. We have lots of examples of problems that
people face who deal with prepaid cards. Just to name a couple that I haven’t that I think
are less known is that, increasingly, people are juggling multiple cards. They may have
a card in which they got their tax refund. They may have a payroll card that their employer
uses to pay them. They may use a card from a store, a retail reloadable card to make
purchases. And what we hear from people is that it’s really frustrating to try to figure
out the different rules that apply to each card, the different ways to get your money
without paying high fees, trying to figure out which cards are protected and which aren’t,
and it’s a real challenge for people, as well as for low wage workers, people who earn cash
who don’t have direct deposit, who may have different jobs. And when you’re not getting
direct deposit onto the card, it can be a real challenge trying to load money onto cards. When we hear this notion that people are clamoring
for prepaid cards, it’s a hugely popular product out there, I think we have a different sense
of it, which is that like so many other high cost products that are out there, that to
a large extent, this reflects bank’s failure to serve low income people and others with
affordable accounts. So there is a need out there, certainly. Whether or not this is the
best way to meet that need is, I think, a separate kind of question, but the barriers
to mainstream and affordable accounts is definitely real. Just in closing, as hopefully we will talk
about today, there are banks entering the market looking to cut their costs and also
maybe deal with other regulatory issues, which the next presenter, I think, will address.
We have concerns and questions about that, and I think it’s interesting. Many people
are celebrating that as a way to bring down costs and provide better standards for these
prepaid cards, if they’re offered by regulated banks rather than these other companies. There
are questions, though, as to who is going to be offered prepaid cards when they walk
into a branch to open an account, and we have seen in other instances people being steered
to more expensive products than they qualify for. We go in to see low income people, new immigrants,
people more on the margins who maybe need more protections and more features on their
card, who are in greater need of a full traditional account. Are they going to be steered into
a prepaid cad, and is that going to be equitable, or is it going to be inferior and more expensive? So I would just applaud again the CFPB for
looking at this issue. I think when we are thinking about regulation and we will gladly
submit detailed comments to the Proposed Rules that were issued today by the CFPB we really
feel like we need to across the board really demand a high bar for this market and not
just look at it as how do we improve a flawed product, how do we create something that is
better than the worst out there or that’s better than nothing, but how do we create
a really strong product that truly meets needs and that moves us toward a banking system
that we want to have in this country. Thank you. [Applause.] MR. DATE: Mr. Eakes. MR. EAKES: Good afternoon. The Center for
Responsible Lending is a policy and research non profit organization that works to protect
home ownership and family wealth. I want to start with the following premise.
In terms of technology and, hence, the ultimate product core costs, general purpose prepaid
cards are indistinguishable from debit cards offered in a checkless banking account. Both
prepaid cards and debit cards must maintain a database of individual accounts. Both must
access the same payments network and technology through a member bank of a funds transfer
network like Visa or MasterCard. The biggest differences between prepaid and debit cards
are differences not in technology, but are differences in regulation, what some people
call “regulatory arbitrage.” A couple of examples of regulatory arbitrage
between bank providers of checkless debit card accounts and currently unregulated or
less regulated prepaid card providers include the following. Debit cards have periodic written
statements of account under Regulation E. Regulated debit card providers have mandated
minimum capital requirements and FDIC insurance. Debit cards have consumer protections for
lost cards and unauthorized card usage. Prepaid cards are exempt from the Durbin interchange
requirements at least for the smaller charter banks. So I want to focus on three things. For a
prepaid card to meet the promise of serving underserved people, I believe it has to have
at least the following three key features or requirements. The first is that it must
have no mandatory arbitration clauses in the account. The second is that there be no tie
in to debt products, either prior to the prepaid card load or after the card has been fully
expended; and finally, that there be no penalty fees such as NSF or overdraft fees. First, arbitration. I pulled last night the
account disclosure for NetSpend, one of the largest prepaid card providers. The customers
must read and agree to these terms before signing up for a NetSpend prepaid card online.
I challenge any person in this room to actually read this microscopic print that has six full
pages on a single front page and six pages on the back. Now, I talked to Mr. Henry before the hearing,
and he said if this is correct, which I believe it is because I pulled it down last night,
that he will have this fixed before the end of the week. My point is this. Buried on page 10 in this
microscopic print is a requirement that any dispute be solved by a mandatory arbitration
and only as an individual, not as a group action. For many cases of abuse or discrimination,
the dollar amount is so small, 2 or $300, that no single individual can ever enforce
their claim. So either you have it one way or the other. You’ll fully regulated, or you
allow consumers to join together to get redress. Debt product tie in. A prepaid card should
have no tie in to a debt product whatsoever. On the front end, using a payday loan to fund
a prepaid card is an invitation to abuse. If prepaid card fees take 10 percent of the
balance on the prepaid card to eventually convert that balance to cash, you will have
converted a 450 percent annual interest rate payday loan into a 700 percent APR line, thereby
circumventing State and Federal usury restrictions on the lending, for protecting military personnel
and others. A tie in with payday lending is simply unacceptable, and a prepaid card that
offers its own payday lending like product is simply unacceptable. Overdraft fees. The single most cited reason
for consumer choice of a prepaid card is to limit spending to the funds actually present
in the account. The very label “prepaid card” communicates a promise that the account cannot
be overdrawn, which by definition would otherwise be a post paid card. Overdrafts should not
be permitted in any form whatsoever on a prepaid card. Prohibiting overdraft and NSF fees is
the single most important step for CFPB to take at this time. If a customer needs debt,
let them get a regulated credit card which is designed for that purpose. Thank you, Mr. Cordray, Mr. Date, and CFPB
staff for holding this important field hearing. Thank you. [Applause.] MR. DATE: We have time for, I think, just
a few questions of this panel. Zixta, would you mind leading off? MS. MARTINEZ: Adam, this question is for you.
In your view, how best can the CFPB address the consumer protection issues in the prepaid
market? MR. RUST: One of the big gaps that I see right
now is the lack of effective disclosures. It is very, very hard to compare different
products. Martin showed an example of a disclosure form that’s very difficult, and I think it
goes further than that. Most of these cards are bought in stores.
If it was truly a free market, there would be a lot of cards in the store, but again
and again, we are seeing card companies set up exclusive arrangements with stores. This week, Green Dot and NetSpend both signed
exclusive agreements with one of the dollar stores. It’s similar with Walgreens and CVS.
This means that when we design a disclosure, just listing the fees probably isn’t enough,
because consumers can then see the fees on their card, but they will have no idea whether
or not that card is a high cost card or a low cost card. What I really believe we need to do, if you
look at the EPA Energy Guide Standards, if you buy a water heater or a dishwasher, it’s
simple. It will estimate the cost of that dishwasher, and it will also suggest to you
that there is a lowest price and a highest price dishwasher. If you go into a store and
you only see one option or maybe two, you might have the choice of two bad options. So in the store is really important. The disclosure
should be able product choice but also about product use. We really need to emphasize to
people that direct deposit, like going in network for an ATM, that this is the way to
save money and to build assets. In the store is a hard way to disclose because
there’s just limited space. I think we need to recognize that low income consumers, there
is an exception to our expectation about how they access information. The smartphone technology
is now included in you go into a Cricket or a BoostMobile store, and there are android
phones for sale there. So a lot of low income consumers are saying, “I don’t want Internet.
I’m not going to have a land line phone, but I am going to have a smartphone,” and that
smartphone technology allows us to help people who are in the store bridge to better disclosures. Here is what I fear if we don’t have action
on disclosures. One possibility is we will continue to have nonuniform standards that
make it impossible to compare. Another real possibility is that a private entity will
come up with excellent programming, perhaps an app, something that allows people to compare
and get a good sense of disclosures, but the ultimate revenue source from that will be
a lead generation system. And so then we’ll see people being told this is the best prepaid
card, but, actually, it’s just the best prepaid card that they’re getting paid to sponsor.
That is why I think disclosure is an immediate, important issue. MS. MARTINEZ: Thank you. MR. DATE: Ms. Del Rio, can I pick up on this
notion of products and product markets being ways in which to mainstream otherwise unbanked
or underbanked customers into the financial mainstream as opposed to creating a wedge?
Would you mind just talking about how it is that this product might be an affirmative
way, be able to be a means by which mainstreaming occurs as opposed to a wedge? MS. DEL RIO: Sure. Well, so one of the things
that we feel is that there are for example, now that banks are entering the market, is
this going to be something that maybe is offered to someone who has had problems managing checks
or having bank accounts in the past, which would seem to be maybe an interim product
to offer somebody, but then graduating them up into a full service account would be something,
an example we think it’s important; also connecting people to savings accounts and other needed
services, which right now largely don’t exist on these cards, in spite of the talk of them
among many. MR. DATE: Thank you. I know that we’re short of time, but, Mr.
Eakes, I would take the liberty of just following up on one thing. You made out some clear sort
of negative attributes in your view about the product and what should not be contained
within them. Would you mind talking a little bit in a more affirmative way? Presumably,
the market could evolve in a variety of different alternative paths from here. What in your
view would be the best one or two ways for the market to affirmatively evolve to best
serve consumers who are otherwise underserved? MR. EAKES: So if the oversight agencies don’t
get in the way and create artificial distinctions, these two markets will converge. Checkless
checking accounts accessed by a debit card with no overdraft fees will converge with
prepaid cards. There’s no reason for them to be separate, and, in fact, a bank account
that has it has to be loaded with money if you are going to be taking something out of
it without an overdraft line of credit. So right now we’re seeing artificial incentives.
The largest banks are motivated to get into prepaid card, because there is a rule for
interchange fees that says each transaction, as a large bank, you can only receive 20 cents
of interchange, but if you’re a small bank or if you have an exemption for a prepaid
card that you meet, the bank can receive, in current terms, about 40 cents on each prepaid
card transaction. So for a very large institution that had tens
of millions of accounts, they have an artificial incentive to move to prepaid cards. If they
are going to do that, then I think it is appropriate, as the Fed proposed and put in place, that
those prepaid cards for very large banks cannot have overdraft fees associated with them. So my real mission in life is to see the unbanked
and underbanked be served appropriately by the huge advances we’ve had in technology.
We have the ability to have very low cost accounts serve people who need to be paying
a very low cost per month, but the technology has never been realized, because the abuses
in the marketplace, first with overdraft fees for bank checking accounts, why would you
offer an account that really is the marginal cost that the technology allows you to do
when you can make thousands of dollars on each account by having what are tricks and
traps on checking accounts? What we need to make sure is that prepaid
card, as it moves towards this convergence, as it becomes an on ramp for families that
really can’t afford the current provision, whether it’s paper statements, whether it’s
things that actually cost money so you can’t ask a bank or a provider to provide the service
for free or for a loss. The question is how do we get products out in the marketplace
that serve very low income, unbanked individuals with very, very low cost, and I think we are
going to see mobile funds. We are going to see prepaid cards, and we are going to see
debit cards that are protected that have as minimal cost as possible, so that those families
can actually access the payment system in a very safe way. I think it is a really exciting time, but
because we haven’t laid the boundary rules for the various product delivery mechanisms,
we haven’t realized a single one of the potential benefits of having networks where the bandwidth
cost has come, you know, it’s down 20 fold, and the computer capability of managing individual
accounts is almost nil now, the cost per account. It should be that we can serve each of the
30 million unbanked and underbanked families in America with a basic simple account that
can be accessed by text or by your phone and other ways that doesn’t require human intervention. To me, that is what is really exciting, and
I believe you guys will get it right. If you don’t, then we’ll sort of futz around for
another decade, but we’re counting on you. [Laughter, applause.] MR. DATE: Thank you. Don’t futz around is
what I am taking from that. Why don’t we turn for a few remarks from our
second panel. Mr. Henry, can we start with you? MR. HENRY: Great. Thank you. Dr. Cordray, Deputy Director Date, I would
like to thank you and your outstanding staff for the opportunity to appear before you today.
I am Dan Henry, Chief Executive Officer of NetSpend, one of the nation’s leading providers
of general purpose reloadable prepaid debit cards for underbanked consumers. Our stated mission is to empower consumers
with the convenience, security, and freedom to be self banked. We are proud of what we
do and committed to collaborating with the CFPB, the consumer advocacy community, and
our industry peers to promote a clear and effective regulatory framework for industry
and the consumers we serve. We are very pleased that the CFPB is stepping
in to help clarify the consumer protection standards that apply to prepaid cards. We
at NetSpend and most of our leading competitors already adhere to the same requirements as
traditional bank checking accounts under the Fed Regulation E, including its disclosure
requirements, protection against unauthorized transactions. We believe we are required to
do so under both Reg E and the Treasury Department’s rules for acceptance of direct deposits from
the Federal Government. Our cardholders also benefit from FDIC insurance
on a passthrough basis. We encourage the CFPB to take the measures that we have long supported,
clarifying the extent that it is currently unclear that the consumer predictions of Reg
E and FDIC insurance apply to general purpose reloadable cards. We also support CFPB’s efforts
to help promote consumer uses of prepaid savings accounts, such as the 5 percent savings product
we offer our cardholders. We are confident that based on our discussions
so far with the CFPB staff that CFPB will undertake its rulemaking in a fact based,
objective manner that will focus on making the standards for consumer disclosure more
uniform while avoiding substantive product limitations in a way that hinders innovation
and competition in an extremely dynamic industry that for the first time is bringing working
Americans the kinds of bank accounts they deserve. According to the FDIC, there’s 60 million
underbanked consumers in the United States. Why is this? Well, most traditional bank products
and fee structures really are not designed for low income consumers who typically maintain
very low balances. It may surprise you to hear that of NetSpend’s
more than 1 million cardholders on direct deposit, more than 5,000 of these cardholders
are employees of Bank of America, Chase, or Citibank. Our customers are typically working
Americans who want control, security, and convenience, and have not had good experience
with banks. They are people who deserve the same quality of financial services as the
more affluent customers of traditional banks enjoy. The reason we have our customers is
because we provide them with a better solution designed to meet their unique financial services’
needs. Bear in mind that the NetSpend card, like
the similar products of our competition, is a bank account. It is FDIC insured on a passthrough
basis, subject to the same consumer protections and compliance requirements as a checking
account, provides access to a host of financial services, including flexible fee plans, a
5 percent interest savings account, free person to person account transfers, free direct deposit
of payroll and benefits, bill payment services, real time account alerts to let consumers
always know how much money they have to the penny, more than 100,000 brick and mortar
locations where consumers can add funds to their cards, many times 7 days a week, many
of those locations open 24 hours a day, and a host of financial literacy and budgeting
tools. We have also developed what we believe is
the most consumer friendly overdraft program in the country. That includes buffers and
a grace period that result in most overdraft transactions, avoiding any fee whatsoever,
and when these fees are charged, they are less than half of most banks and credit unions
in this country. Our product is a bank account but one in which we have stripped out the
real estate cost and the personnel cost of bank branches, leveraged the infrastructure
of nonbank retailers to reach underbanked consumers, and leveraged technology to build
a product platform and network that provides its consumers with utility, security, dignity,
and access that they have never had before. Due to fierce competition in our industry,
the prices of reloadable prepaid cards are trending down, while at the same time the
price of low balance checking accounts are trending up. Many of the consumers we try
to serve no longer have access to checking accounts, because they are among the 19 percent
of U.S. adults who can’t qualify for an account, because they are in a checklist of the Telecheck
database. I believe those of us who serve the low income
population in the United States have a higher standard of which to adhere. To truly serve
these consumers, we need to be allowed to compete on a level playing field with the
traditional bank products that have failed them. We believe it’s important that any new
regulation of prepaid cards enhances consumer’s freedom of choice, not limit it. We are committed
to developing more effective ways to communicate with our customers about the fees, terms,
and conditions of our products, but limitations on the products such as restrictions on the
types of fees that can be charged will only harm consumers and stifle innovation. We look forward to working with the CFPB,
consumer advocates, and our industry to facilitate the development of financial service products
to serve underbanked Americans that have largely been left behind by traditional bank lines. MR. DATE: Thank you, Mr. Henry. [Applause.] MR. DATE: Mr. Choi. MR. CHOI: Thank you, and good afternoon. I
am Hyung Choi, and I am the head of U.S. Prepaid Products of Visa, Inc. I’d like to thank the
Consumer Financial Protection Bureau for inviting Visa to participate in today’s important discussion
about prepaid cards. We are encouraged the Bureau is seeking information
with an eye towards considering rules that foster informed use of prepaid cards that
support delivering the level of protections consumers expect from electronic payments.
We hope today’s community discussion will be the beginning of a productive dialog on
this topic. I’d like to first explain a little bit about
who Visa is and what we do. Visa is a payments technology company. We connect financial institutions,
merchants, governments, and consumers around the world with products and services that
are designed to make payments faster, more convenient, more reliable, and more secure.
To connect these entities, we operate a powerful global transaction network and provide advanced
security and risk management that has kept fraud to historically low levels. Visa offers a comprehensive set of payment
product platforms for card issuers to deploy, including debit, credit, and prepaid. This
choice furthers our goal of bringing digital currency to more people in more places worldwide.
Although we create and management the product platform, Visa does not issue cards, set cardholder
fees or interest rates, or make loans to consumer. The consumer and merchant relationships are
managed by financial institution clients. Our business is driven by consumer and merchant
desire for more efficient payments. The most significant force driving our industry remains
the secular shift away from cash and checks toward electronic payments. To that end, Visa
designed prepaid products to compliment existing credit and debit products by providing an
option to access a designated pool of funds without the need for an individual bank account
or line of credit. Within the prepaid platform, there are a range of programs designed to
meet highly specific needs, including everyday money management known as general purpose
reloadable, or GPR cards, government disbursements, payroll, rebates and incentives, employee
benefits and health care expenses, and perhaps the best known use, gift giving. Without question, this is a rapidly evolving
product category. I believe Visa and the industry generally are building and growing the prepaid
category. I believe Visa and the industry generally are building and growing the prepaid
category in products with the consumer at the center. The vast majority of practitioners
supporting these products are doing it with the consumer’s best interest in mind. They
recognize the financial needs of the consumers using these products and the need to ensure
consumer confidence in using the products. The prepaid category will only continue to
grow if we maintain and build consumer value and trust in the products. Visa backs prepaid
products with the same security, reliability, and convenience as credit and debit cards,
beyond what the current regulation requires us to do. These funds are secured and protected
by financial institutions and are subject to State and Federal regulation, which vary
by type of product. Visa prepaid products are issued by regulated
financial institutions, and they are protected by Visa’s zero liability protection, which
ensures consumers are not responsible for unauthorized charges on their card. Visa also
applies the same sophisticated risk and fraud screening to prepaid cards. This important
technology has kept fraud in the Visa system to historic low levels, just 6 cents out of
every $100 transacted globally. Prepaid cards can be a valuable tool to provide
access to the financial mainstream for the millions of Americans who don’t have a traditional
bank account as well as provide additional value to bank consumers. In conclusion, prepaid delivers an important
financial service to million of consumers and is backed by Visa with the same security,
reliability, and convenience of using Visa credit and Visa debit cards. We will continue
to actively work with financial institutions to deliver choice to consumers, businesses
and governments, who use prepaid products, and w are looking forward to working with
the Bureau to foster a greater understanding of these products, their protections and benefits.
Thank you. MR. DATE: Thank you. [Applause.] MR. DATE: Mr. Kuiper. MR. KUIPER: Thank you. Director Cordray, Deputy
Director Date, Assistant Director Blow, and Assistant Director Martinez, I wish to thank
you for the opportunity to just participate in the field hearing today. I am Jeremy Kuiper,
Managing Director of the Bancorp Bank Payment Solutions Group. I oversee all functions for
the bank relating to prepaid cards. I have participated in the payments industry
for more than 25 years, and I have witnessed the dramatic growth of prepaid products over
the last decade. Bancorp has assets of $3.18 billion and is a founding member of the Network
Branded Prepaid Card Association. Prepaid cards are popular because they address
an important consumer need, providing secure payments that are safer than cash. One thing
I’ve heard historically is that these products are not protected against loss or theft. This
is simply not true. I’ve reviewed a number of the terms and conditions associated with
all the major general purpose reloadable programs, and every single one provided protections
for cardholders against loss, theft, and unauthorized transactions. The Bancorp Bank Payment Solutions Group has
issued tens of millions of prepaid cards across all segments and product types of the prepaid
marketplace and to consumers across all socioeconomic levels. These programs vary dramatically in
their features and functionality, depending upon the goals of the program. Prepaid cards have opened the door to the
card based financial system to many of the approximately 60 million Americans who are
unbanked or underbanked. Many in these groups have limited access or no access to bank branches
or ATMs in their neighborhoods. Convenient access to prepaid cards has been a key driver
of their popularity. More recently, we have observed prepaid card
usage trending upward among Generation Y consumers. These consumers choose prepaid cards both
as a way to avoid overspending and debt, and because the product better fits their needs
than the traditional checking account. I believe this broader adoption of prepaid products
speaks to the true value that these cards offer to consumers. Contrary to earlier statements, prepaid cards
are, in fact, currently afforded strong consumer protections. For example, virtually all bank
issued reloadable card programs qualify for FDIC deposit insurance coverage on a passthrough
basis. Bancorp and other issuers support requiring FDIC insurance protection for GPR cards. Additionally, most programs provide some or
all the protections required for other types of cards under the Electronic Funds Transfer
Act and Regulation E. These protections apply in modified form to payroll cards and any
prepaid card programs that receive Federal payments. Bancorp is supportive of the extension of
Regulation E as it applies to payroll cards; however, we do wish to engage in dialog with
the Bureau regarding the proper provisional credit structure for this product. I am concerned with studies that have been
done by consumer organizations that have been proven to be based on false assumptions and
unrealistic consumer usage patterns. These studies suggest our consumers are unsophisticated
and uneducated. That is simply not the case. I worry that if these false assumptions are
adopted by the Bureau, it may result in misguided regulatory environment. Finally, Bancorp stands ready to work with
the Bureau and all constituents, prepaid consumers, consumer advocacy groups, and others relative
to work in the evolution of prepaid card disclosures. In conclusion, I wish to thank you again for
the opportunity to share my thoughts and experience, working with participants in the prepaid card
industry, and would certainly welcome any questions. Thank you. MR. DATE: Thank you. [Applause.] MR. DATE: We have time well, strictly speaking,
we don’t have time, but let’s, anyway, just have time for a couple of questions. Marla,
would you like to lead us? MS. BLOW: So, Dan, I just want to ask you
a question about the consumer. Your organization does a lot of marketing, a lot of marketing
research, and we’ve seen the rapid growth in this industry and very curious about who
this consumer is, what drives the appeal. What do you see as the real underpinnings
of the growth in this business? MR. HENRY: Thanks, Marla. This consumer and I really appreciate this
opportunity, because before we came into this room, I was able to spend a fair amount of
time with nine of our customers here in the area, and those customers, they are mothers,
fathers, veterans, and friends of mine. I just I can’t tell you how much I enjoy meeting
these folks and every time I talk to our customers, because who they are, they are hardworking
Americans. They are not looking for a handout. They are not looking for protection. We have
customers that have been with us for 5, 6, 7 years. I can assure you, they’re well aware
of the fees on our product, but, more importantly, they’re well aware of the features and functionality
on a product. They know that when a NetSpend card when it’s not a direct deposit, you have
access to your funds when they post, not when they settle. There’s not a bank in this country
who does that. They’re aware that they get 5 percent on their savings account. I don’t
know anybody, any bank, that offers 5 percent interest on savings. The feature that I have heard today from our
customers and I’ve heard for years that they love the most is our instant wireless alerts.
Anytime there is any activity on your NetSpend account, you can receive a text message free
of charge which tells you your balance to the penny with details of how much you just
spent and where and what time. So you think about a spending control and a fraud control,
it’s phenomenal. Director Cordray, you asked at the beginning
of your speech, try to imagine your life without a checking account. Try to imagine your life
without a checking account. How do you send money to a friend or relative? You go to a
money transfer location. You stand in line. You pay $15 to $30 to send money many times
just across town. With NetSpend, you can send money, up to $1,000, instantaneously and for
free, with a simple text message on your phone from one Netspend cardholder to another. So we talk so much about the fees of the card,
but we don’t look at what savings are generated for this consumer, not only in avoiding money
transfer fees, but just think again, Director Cordray, the check cashing fees that one avoids.
I would say close to $10 billion were loaded on our cards last year through direct deposit.
Based on average check cashing fees, we saved consumers over $300 million on check cashing
fees. Now, what do they do once it is directly deposited in their account? They pay their
utility bills on the phone for free. So I think we all agree and I’ve heard that
time and time again that prepaid does have the opportunity to create a solution that
is absolutely meaningful for this consumer that has been overlooked or taken advantage
of for decades by financial services industry that really it’s designed to served consumers
with money. Traditional retail banking structure, a retail bank branch can serve about at most
5,000 customers, but it needs 20 to $30 million of deposits to be justified. You take our
customer base of 2.3 million cardholders, you need 4 , 450 branches to serve them, but
with the average daily balance of our customers, there’s enough deposits to maybe support six
or seven branches. I, again, believe that what this industry
is doing is exactly, Martin, what you are calling for, which is leveraging technology
and solutions and services in a world of the Internet to provide solutions to low income
consumers that traditional banks are just not designed to provide. So I don’t want to
sound critical to traditional banks at all. That is not what I am trying to say. It is
just the business model of traditional banks will not allow this to be served. So before you cut me off, I just want to say
thank you to Lee and Veronica and Regina and Kyda and Darrell and Darnell, William, Clarence,
and Diedre. If you stand up real quickly, so you can let everybody know who the customers
are of this product. I appreciate very much your [Applause.] MR. DATE: Thank you, Mr. Hunter. I wonder if I might just ask for Mr. Kuiper
just for if you’d answer in maybe a minute, which is not going to be easy. [Laughter.] MR. DATE: Given your business model, presumably
you work with a number of different program managers. You happen to be in a seat, therefore,
to see a number of different innovations over time. Each of this panel and Mr. Eakes all
talked about sort of the value of pace of innovation for this product and for this customer
segment. You talk about from your point of view kind of the trajectory of innovations
within the product market from this point forward. What do you characterize as sort
of the themes? MR. KUIPER: I appreciate that, and you act
like you’re giving me a long time, trying to keep me to a minute. [Laughter.] MR. KUIPER: So relative as far as innovation,
prepaid is innovation, and many of our productive program manager partners continue to work
on focusing on innovating how they improve their customer experience and the functionality
that they deliver. Netspend is a classic example of that, and we’re the leaders. But relative as far as in that innovation,
we will continue to see, for example, remote deposit capture being developed and expanded
relative to prepaid cards to increase the utility and convenience to the consumer, relative
to mobile and wallet applications, again, utilizing technology to improve the customer
experience, its convenience, and the functionality of these products. And you’ll continue to
see, for example, the rewards and promotion products. We continue enhancement relative
to savings as far as, again, NetSpend certainly has that. Others are certainly emulating that
in the marketplace, and you will continue to see that expand as well. But prepaid in its very DNA is innovation,
and you will continue to see these and others advance relative all about increasing the
value relative to the consumer. MR. DATE: Thank you. I have learned over time
to always give Marla Blow the last word. So, Marla, one closing question for this panel? MS. BLOW: Sure. I will pass the closing word
on to Hyung. I just want to ask, based on where you sit
and the data that Visa has access to, being able to see broadly usage patterns and the
trends here, what are the things that you think about as sort of potential issues? What
kind of keeps you awake at night as you look at this industry and think about where it’s
headed? MR. CHOI: Thanks, Marla, and I will try to
keep it within the minute. MS. BLOW: You have 59 seconds. [Laughter.] MR. CHOI: So I’m going to come back to a general
theme and just the notion of what keeps us awake or what keeps us in terms of top of
mind what’s important for us and what are we thinking about, and I will come back to
a theme that you heard me reference in the opening remarks. And that’s about consumer
choice. If you think about prepaid and where it is
today, prepaid is an electronic payment product that is very much in its infancy. There’s
still much work to be done to bring the value of prepaid and electronic payments to the
millions of deserving Americans, as Director Cordray also mentioned in his opening remarks. Visa supports transparency for prepaid products
and protections for Visa prepaid account holders, but one of the strengths of prepaid is the
fact that it’s not a one size fits all product; therefore, it’s important that any of the
regulations that are contemplated are respectful of not only the different consumers using
prepaid but also in the context of the different prepaid products being used and for what reasons. So it all comes back for us to that whole
idea of how do we preserve and maximize consumer choice. MR. DATE: Thank you, Mr. Choi, and thank you
to all of our panelists. If you would join me in thanking them for their time. [Applause.] MR. DATE: We will not move to the next phase
of our field hearing today, which Zixta Martinez will lead us through, but before we do that,
we can excuse our two sets of panelists and thank them again. MS. MARTINEZ: Yes. I also want to take a moment
to thank those joining by Livestream today. You can follow us on Twitter at @CFPB. The
hashtag for this event is Prepaid. And now it’s time to hear from you as community
leaders, advocates, industry representatives, and residents. The open mic portion of today’s
field hearing is an opportunity for the CFPB to hear about your experience with prepaid
cards, what is working well in this market and what could be improved. This is a great
turnout, but it means that we’ll have to limit each person’s statement to about 2 minutes. You will, however, have an additional opportunity
to share your views with CFPB, even if you don’t get to the microphone. Today, the CFPB published a Federal Register
Notice requesting your comments. Everyone who attended this hearing and RSVP’d by e
mail will receive a Web link to the Notice for Comments. If you didn’t share your e mail
address with us, that’s okay. You can visit our Web site, consumerfinance.gov, where you
can find the notice. What we learn from you is very valuable to
CFPB, so thank you for taking the time to visit with us today, and why don’t we get
started with the open mic portion of this field hearing. I will call the name of the
individuals who signed up to share their experience with us. And the first person is Mr. William Cross.
Will you please stand up, sir? ATTENDEE (William Cross): Thank you very much
for inviting me here today and to comment on my experiences. Hold that for me, please. My experience is like this. Number one, I’d
like to thank David Price’s office, because I’m a veteran, and he’s helped me, as he mentioned.
I’m a 100 percent disabled veteran. I don’t know how many of you panel members
have experience working all your life very hard fighting for your country and being disabled,
having all your bills paid, and then not having any income, surviving on your savings, getting
in credit trouble because you can’t work because you’re in the VA hospital and you’re about
dead and I’ve actually been declared dead and you go to the bank, and you say, “I’d
like to open up a checking account, so I can receive my benefits,” and they say, “Oh, no.
You can’t do that. You got bad credit.” I had a life that was almost taken from this
country, but I can’t open a checking account. Because I almost died for defending my country,
now I have bad credit, sir. Protection? The banks didn’t give me any protection,
but the doors are open because I almost gave me life for them who barely knew me. That
quarter I gave you is grace, and it’s about the grace of God that I’m here. It’s more
than you had when you came here, because whatever you had, it added on to that. NetSpend opened up the door for me to help
me to pay my bills, to receive the money that I receive for my wounds, for my service, for
this country. They allowed me to get into the payment system that exists today, because
you have to pay your electric bill, your gas bill, your mortgage, your car notes, the electronic
transfer. People don’t take cash anymore. To open up a bank account and not have the
actual fees that I had, I had to have $1,200 in the bank and keep that balance there. Sir, you had a piece of paper with all those
rules and regulations on it. You said it was about 7 pages, 12 pages. MS. MARTINEZ: Mr. Cross? ATTENDEE (William Cross): Yes. MS. MARTINEZ: Thank you very much for your
testimony, and thank you very much for your service ATTENDEE (William Cross): You said 2 minutes,
right? I have about 30 seconds. MS. MARTINEZ: to our country. ATTENDEE (William Cross): I have about 30
seconds. You said 2 minutes, right? MS. MARTINEZ: Yes. ATTENDEE (William Cross): I have an aviator
watch for time on it. Sir, you said 12 pages. I went to a bank,
Bank of America, to open up an account. They had a book of regulations that I had to go
by, not 12, not 12 pages. So I’m just saying it’s a good product, regulated properly, and
it will help a lot of people. MS. MARTINEZ: Thank you, Mr. Cross. [Applause.] MS. MARTINEZ: Mr. Michael De Los Santos. ATTENDEE (Michael De Los Santos): Good afternoon.
Thank you for allowing me to speak. My name is Michael De Los Santos with Reinvestment
Partners. In addition to being a consumer advocate on
financial issues over the last 5 years, I am also a user of prepaid cards. In addition
to the traditional banking products, my family also has prepaid debit cards that we use.
So I’m not here to attack the product. I think int’s a good product that serves a good purpose
for a lot of underbanked and nonbanked families. But I want to focus on two issue I think that
are important when we talk about these cards as being a gateway for low wealth families
back into the financial services industry. One, there needs to be an incentive to save
on the cards. So that way, low wealth families have a secure, affordable way to build wealth
and assets, and secondly and more important is that to not strip that wealth by having
credit products available on these prepaid cards as well. Whether it’s predatory or not,
they don’t need predatory products on these prepaid accounts. We already have a plastic
card with credit available on it called a “credit card,” and that’s where credit should
say. And prepaid debit cards without credit options are a better service to our low wealth
families than another credit product that can attack savings or where they hold their
money. Thank you. MS. MARTINEZ: Thank you, Mr. De Los Santos. [Applause.] MS. MARTINEZ: Ms. Donna Gallagher. [No audible response.] MS. MARTINEZ: Ms. Renee Wall. [No audible response.] MS. MARTINEZ: Mr. Rubin and Ms. Elizabeth
Davis. [No audible response.] MS. MARTINEZ: Mr. Tom Feltner. ATTENDEE (Tom Feltner): Thank you, Director
Cordray and staff from the CFPB. My name is Tom Feltner. I’m the Vice President of Public
Policy and Communications and the Chicago based Woodstock Institute. I just wanted to address a couple issues that
we have thought through as we consider the consumer protections and the issues of access
and security for prepaid cards. I think it’s really important to keep in mind
what we’ve heard today about how GPR cards, general purpose reloadable cards, are for
you know, in the vast majority of cases are collection of features that are already widely
available on checking accounts, and so we think that if there is a consumer protection
that’s available to checking customers, then it should also be available to GPR customers.
And if it is a practice that is unacceptable for checking customers, on checking accounts,
then that practice should also be unacceptable for prepaid cards. I just want to touch on three, on three issues
very quickly. When customers swipe a card, whether they are paying now with a debit card,
paying later with a credit card, or they are paying with funds that they have already put
on their GPR card, those funds should be insured. The fund availability process should be clear,
and consumers should be protected from fraud. And I was really happy to see most of those
issues addressed in this morning’s CFPB proposal. I think, second, we feel that credit products
of any kind undermine the value proposition of the GPR card, and when you offer high cost
nonproductive forms of credit through GPR cards, it really undermines that value proposition
of that product as a strictly transactional product. And I think it also at the same time, it really
threatens to exploit Federal banking preemption law to circumvent a lot of the strong consumer
protections that States have established for short term credits, such as those we’ve worked
very hard for over the last decade in Illinois. And I think, finally, we need to make sure
that there’s a process in place, so that GPR customers aren’t relegated to a second class
financial system, and I think whenever GPR products are offered, it should be offered
alongside any other product that that consumer can qualify for. And if a consumer does not
currently qualify for, is interested in a checking account, then there should be, you
know, a process in place to make sure that those customers can be referred up to a checking
account, if that’s what they choose to engage in later. MS. MARTINEZ: Thank you, Mr. Feltner. ATTENDEE (Tom Feltner): So I think if we can
address those three issues, we see a lot of promise in the GPR product. Thank you. MS. MARTINEZ: Thank you. [Applause.] MS. MARTINEZ: Mr. Eric Jefferson. ATTENDEE (Eric Jefferson): Good afternoon.
Thank you for letting me speak. My name is Eric Jefferson, graduate of North Carolina
Central University. About 2 to 3 weeks ago in the mail, I was
sent a card that I did not even apply for. It had my name on it, and it had “Preferred
Cardholder” under my name. The card is actually right here. It’s called the Achieve Debit
Card. It has a few benefits that come with it on it that says free text message alerts,
free online banking, free direct deposit, and no overdraft fees. The only thing that, you know, when you owe
the bank money or if you’ve ever been broke, the best word that you can hear is “free.”
So I saw that it said “free” to activate, so I activated the card, because you have
to go to a Money Dot Green Card [sic] location, upload money on it, like the other prepaid
cards, but the only thing, there was nothing else sent in the envelope in regards to any
extra disclosures or fees. So when I tried to use the card for my direct
deposit, because it comes with a direct deposit number and a routing number, for my payroll
at my new job, I find out about all the fees that I didn’t know, $25 to replace the card,
a $9 monthly fee, a $2.95 fee just to get a paper balance of the statement, and also
a dollar fee every time it’s swiped per transaction. The only thing I can say in regards to criticism
about prepaid cards is just be transparent. In any fine print or any kind of print that
you can read in any organization or entity, just be transparent about it. Whatever the
fees are, to let people know up front. I also work with I am also with Verizon. As
far as phone companies go, everybody knows that Verizon is very, very high. Verizon also
has great customer service, but all of their prices, Verizon is up front about it. So I want to close by saying that the fine
print should be see through, because every organization, every entity should be transparent.
So any fine print that comes on in many male, everything should be transparent, because
all of the fees that come with the disclosures of any card should be known up front. That’s
all I have to say. MS. MARTINEZ: Thank you, Mr. Jefferson. [Applause.] MS. MARTINEZ: Lonnie Green. [No audible response.] MS. MARTINEZ: Lucy Gorham. ATTENDEE (Lucy Gorham): Thank you very much,
and welcome to Durham. I am Lucy Gorham. I am the Senior Program Director at MDC, a Durham
non profit concerned with equity and opportunity. We run two programs where we prepare tax returns
for over 25,000 households each year. This gives us a really intimate view of the financial
lives of a lot of low and moderate income households, including what I could only describe
as the wreckage of a financial services system, which often doesn’t meet their needs. Auto loans are often abusive. Foreclosure
issues, because of having to put medical debt on credit cards and so on and so forth. So
we do our best to direct these households to better financial products, and, in fact,
we offer a very good prepaid card through our FIDA and Benefit Bank sites. The issue that I see is that whether a product
is good or not is really up to the provider. There is no overarching regulatory system
which is addressing or providing a bottom line for how products can be offered on the
market. So, of course, that’s where you come in, and I hope that in addition to providing
a stronger regulatory framework, you’d also consider working with Treasury to have a national
prepaid card that could be offered at tax time to any consumer that could be a national
model for what a really strong prepaid card could look like with a savings pocket, FDIC
insured, and so on and so forth as the consumer protection side of the panel mentioned to
you. Thank you very much. MS. MARTINEZ: Thank you, Ms. Gorham. [Applause.] MS. MARTINEZ: Ms. Helen Savage. ATTENDEE (Helen Savage): Thank you. My name
is Helen Savage. I am with AARP in North Carolina. Thank you for this opportunity to speak to
you. AARP has six suggestions that we would really
like to see applied to this product, so that they’re meeting a promise and not creating
pitfalls for folks. The first one is we’d like to see the expansion
of the Electronic Funds Transfer Act and Regulation E to include all prepaid cards. This is important
to limit fraud losses, provide a dispute resolution process, and create disclosure requirements. We also suggested issuing banks that provide
prepaid cards should be required to meet the FDIC passthrough requirements. And our third recommendation is to develop
a standardized disclosure form that allows consumers to be able to identify all the costs,
all the fees and the features, and be able to compare among the various options. I agree with the suggestion that said that
overdraft and shortage fees should be prohibited, and another aspect is to prohibit direct deposit
account advances with high fees. We do not need this product to turn into a virtual payday
lending. Advocates of this State fought so hard to get rid of storefront payday lending.
We don’t want to see it return in any form. [Applause.] ATTENDEE (Helen Savage): And my final point
is that large employers and government agencies that are turning to prepaid cards as a way
to pay salaries or a way to provide benefits like Social Security really have an obligation
to negotiate for the very best card, the very strongest card, they very best deal they can
get on behalf of their customers. Thank you for being here. MS. MARTINEZ: Thank you, Ms. Savage. [Applause.] MS. MARTINEZ: Lagonia Turk [ph]. ATTENDEE: I’m a NetSpend user, and I’ve been
for like 5 years now. And I actually enjoy using NetSpend. I can get my direct deposit
free through my company with no charge. I can virtually pay all my bills either online
or in person. They have like a virtual account that I have that’s like two separate totally
different card numbers. So I can either use that for online, and I can use my regular
for in store purchases. And another thing I like is I receive texts.
So as soon as I make a transaction, that text is automatically sent to my phone, like within
seconds, and I also know my balance every day. I think it’s pretty good to keep prepaid,
but certain stuff, like FDIC, NetSpend does have, and that was one thing that I reason
why I went with them, because I searched for a bunch of prepaid cards, and some of them
don’t have FDIC. I like my money to be guaranteed to get back to me if something happens. [Laughter.] ATTENDEE: I don’t know about anybody else,
but that’s just me in particular. MS. MARTINEZ: Thank you, Ms. Turk. [Applause.] MS. MARTINEZ: Mr. Craig Sapperstein. [No audible response.] MS. MARTINEZ: Ms. Cassandra King. ATTENDEE (Cassandra King): I thought you guys
skipped me. Well, my name is Cassandra King, and I’m an
agent as well as a user of a prepaid card. I do enjoy my prepaid card. I will say for
my customers, we are very up front with the fees that are attached with the prepaid card.
We let them know the monthly fees. We let them know the load fees, the unload fees,
the withdraw fees. And most of my customers are actually satisfied with the I.C.E. card.
We had five of them here today, but, unfortunately, they had to leave a little bit early oh, except
for one. I enjoy it. I get direct deposit free of charge,
automatic withdrawals free of charge. Online payments are free, and that’s, I think, a
tool that we also use to sell that card. A lot of our customers need to pay their bills
ASAP, and so instead of them driving around to the venue to actually pay their bills,
we say, “Hey, we’ll load your card, pay it over the phone for you,” and I think that’s
what a lot of customers are looking for, convenience, easy fees, and I don’t think it’s just the
unbankable. I think it’s a little bit of liberty, because some people are afraid to go into
banks. And where I am, we’re open Monday through
Saturday, 8:00 to 8:00, 12 hours a day. So, when the banks are closed, we’re also open
on holidays when the banks are closed, and I service my customers. They call me their
accountant the other day, because I don’t think a bank is going to take as much time
or as much care with a customer as an individual finance company or 24 hour check cashing or
Walmart, places like that. So I am for prepaid cards. I do feel like
there maybe should be some laws as far as the fees go. They should be minimal, but I
am a customer. I enjoy it, and I believe that all of my customers that come to my business
enjoy the prepaid card. MS. MARTINEZ: Thank you, Ms. King. [Applause.] MS. MARTINEZ: Mr. Al Ripley. [No audible response.] MS. MARTINEZ: Ms. Belinda Wilson oh, wait
a minute. We have Mr. Ripley. ATTENDEE (Al Ripley): There we go. Can we
hear me? Thank you. I’m sorry. I was on the other side of the room. Director Cordray, I wanted to thank you and
your staff for coming to North Carolina and having this hearing and for the opportunity
to speak to you today. My name is Alfred Ripley. I’m an attorney with the North Carolina Justice
Center here in North Carolina where I director our Housing and Consumer Project. The mission of the Justice Center is to protect
the interests of low income citizens and communities across our State, and for 18 years, the Justice
Center has been working to address abusive industry practices in a variety of areas related
to financial services. And while we certainly recognize there’s many benefits to prepaid
cards, we’re also very concerned about the lack of regulations and protections against
certain elements that prepaid cards can carry. We hope that you will consider adding protections
including the following. You’ve already addressed today the need to
ensure these accounts. We certainly hope that FDIC protection could be added to all of these
accounts. We also, as some of your panelists remarked,
are very concerned about arbitration clauses. We have seen numerous instances in other industry
contexts where arbitration clauses can be abused and really disadvantage consumers and
take away their right to any type of redress to abusive conduct. We also want to make sure that fees are adequately
disclosed and revealed, so that they are transparent, but not only in the sense that when you read
a contract, you can see what the fees are, but also so that you can compare products
to each other. And so a type of transparency that enables consumers to compare these products
would be very, very helpful. That being said, we also recognize that very
often, unfortunately, in this marketplace serving low income consumers, competition
doesn’t work the same way that it does sometimes in other industry sectors, and you can’t always
rely on competition to drive prices down as low as they might otherwise go. So we think
that it’s also important to have real limits on the fees and the amount of fees and how
high they can be, when they can be charged, how frequently they can be charged, the amounts
that they can be charged. And finally, we hope that this can be a vehicle
to help enable low wealth consumers to gain access to more mainstream banking products,
sort of an introductory way that consumers are able to demonstrate that they can manage
their finances, handle their finances, and perhaps get access to other financial services
that will not be so costly. And again, thank you so much for the opportunity
to be here today. MS. MARTINEZ: Thank you, Mr. Ripley. [Applause.] MS. MARTINEZ: Ms. Belinda Wilson. ATTENDEE (Belinda Wilson): Piedmont Advantage
Credit Union currently offers the prepaid card as an alternative for students, travelers,
and the unbanked population. The monthly fee of $4.95 is waived if they have direct deposit.
If they do not have direct deposit, the $59 that they pay annually is less than two overdraft
fees. We partner with our business sponsors, our
select employee groups, to offer the prepaid card as an alternative to paycards at a cheaper
price than what they currently pay their payroll provider. Our product is great for our member
owners, and it does not instill abusive practices. So we would like you to consider regulation
on the fees, but also know that this is a good alternative for many consumers. Thank you. MS. MARTINEZ: Thank you, Ms. Wilson. [Applause.] MS. MARTINEZ: Marche Clarke. ATTENDEE (Marche Clarke): Good afternoon,
Mr. Cordray and panel and to David Price who I haven’t seen in the audience. Thank you
for having this forum. My name is Marche Clarke. I’m Director of Development with Guilford
County Homeownership Center in Greensboro, North Carolina. One of the problems first of all, I am not
opposed to prepaid card because I think it does have a place in our society for those
who are unbanked or underbanked. My concern is I do foreclosure prevention, and already
we see clients coming into our office who are using these cards and not realizing the
fees that are attached to them and who are able before the fees are attached are able
to use those cards to make payments on their mortgage when we get a modification or other
resolution. But because of the fees, when it’s time to
deduct the payment, they no longer can afford to make that payment, and so I think that
the fees are one of the sticking points for this card and the fact that there is no disclosure. Also, I saw senior citizens in front of me
leave here, and we’re talking about tying this to technology. We’re also talking about
transparency and the fees. Well, I’m here to tell you, I’m over 40 years old, and I
couldn’t even read what’s on the back of those forms, and so I know the senior citizens can’t
read it. And also, there are so many conditions and rules that there needs to be a way to
address that to elderly population. I listened to this college graduate back here.
If he can’t and wasn’t aware of those fees and disclosures, then what makes us think
somebody over 60, 70, 80 years old is going to be aware? Those who service these cards, I’d like to
see that we not wait until we get 5, 10 years down the road and not have any regulation
or enough regulation. I also want to know if the CFPB is considering
Community Reinvestment Act. When these servicers are targeting low income communities, does
that mean they are going to be subject to Community Reinvestment Act so that they could
commit money and resources back in our community? MS. MARTINEZ: Thank you for your remarks,
Ms. Clarke. They are very comprehensive and greatly appreciated. [Applause.] MS. MARTINEZ: I’d like to invite Ms. King’s
colleague who didn’t get a chance to testify. ATTENDEE (Renee Wall): Hi. My name is Renee
Wall, and I agree that prepaid I use prepaid cards. I have for about 5 years. I have very
much enjoyed using the I.C.E. card as opposed to some other cards that I’ve used. But I was a little offended. You all seem
to think that it’s unbankable, bad credit, educated people, low income. I’m a graduate.
I’m a registered nurse. I make six figures. I don’t have bad credit. I use my prepaid
card for the convenience. I don’t have a $35 overdraft fee, nor do I have a fee to use
my bank card that I have with Cassandra. I don’t pay to use it to pay my utility bills
every month. There’s no charge for me to do that. I have a 17 year old, a 19 year old,
a 20 year old, and a 22 year old that all have prepaid cards to teach them financial
savvy. The find the banking system old fashioned and inconvenient. You have to go to the bank
9:00 to 5:00. They’re in school. They’re in sports. They’re in work. They’re away at college.
They really like having prepaid cards. I think it’s the way of the future. They get it on
their smartphones. I think it needs to be regulated. I think
it needs to be fair, but it’s not only for people that are uneducated or low income or
it’s for anybody. I just think it needs to be better regulated. MS. MARTINEZ: Thank you, Ms. Wall. [Applause.] MS. MARTINEZ: Thank you, everyone, for joining
us. That concludes our field hearing. I want to in particular also thank those for attending
who watched by Livestream. [Applause.] • • •

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