Are prepaid credit cards assisting or harming customers?

Are prepaid credit cards assisting or harming customers?

The middle for Responsible Lending is a research that is non-profit policy company specialized in protecting home-ownership and family members wide range.

Let’s start with the after premise: when it comes to technology and therefore main item expenses, basic purpose reloadable prepaid cards are indistinguishable from debit cards connected with checkless payday cash advance Covington Indiana checking records.

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

Both prepaid and debit cards have actually a requirement to “know your client” because the reports must move across a bank to get into the payments system.

Thus, the largest differences when considering prepaid cards and debit cards are distinctions maybe not in technology but in legislation, or what’s usually referred to as “regulatory arbitrage” in support of the unregulated providers.

Some situations of regulatory arbitrage between bank providers of checkless debit card accounts and presently unregulated prepaid credit card providers consist of:

  • Debit cards have periodic written statements of account under Regulation E;
  • Regulated debit card providers have actually mandated minimal money demands;
  • Debit cards have customer protections for missing cards or card that is unauthorized; and
  • Prepaid cards are exempt through the Durbin interchange needs, at the least for the smaller, rent-a-charter banking institutions. Continue reading Are prepaid credit cards assisting or harming customers?