Sen. Lee wants prepaid credit card regulations stripped
(KUTV) John Bird got a rude awakening when he tried to use his prepaid debit card to buy gas last year. The pump wouldn’t authorize the charge.
Bird’s card had been loaded with more than $5,000, but when he got online to check the balance, he discovered that it had been drained by a crook who had copied his card and used it all over the Wasatch Front.
Had Bird been using a traditional credit card or debit card tied to his bank account, the fraud would have been covered by the credit card company or bank - that's federal law. But, because Bird was using a prepaid card, there were no protections. Bird was told he was out the money.
Stories like Bird’s got the attention of federal regulators. President Obama, before leaving office, declared a handful of new protections for prepaid card users, including fraud protection.
Those rules are set to go into effect in October but will never get that chance if a group of Republican senators have their way. A bill has been proposed that would block regulation of the prepaid card industry. Utah Sen. Mike Lee is among the bill’s sponsors.
Wednesday, Lee told Get Gephardt that the rule change could cost the prepaid-card-industry $1.53 billion.
"I don't think they've demonstrated enough of a benefit to justify that type of regulatory expense," Lee said.
According to several studies, prepaid cards are primarily used by poor people, young people, and people with bad credit who can't qualify for a credit card.
Lee argues that stripping consumer-protections from prepaid cards helps the people who use them. He said that if regulations hit the prepaid-card industry in its pocketbook, those costs will get passed on to customers.
"We don't want to see the same customers who have been pushed into this market with no other place to go,” he said. “That's why we want to keep the [consumer financial protection bureau’s] aggressive, overly intrusive regulation out of this business."