Consumers have a new advocate in the Consumer Financial Protection Bureau (CFPB), up and running since July 21, but is this new federal watchdog overly concerned with consumer credit cards to the detriment of other, more pressing matters?
The CFPB is intended to serve as an outlet for consumer grievances related to various financial products, including bank accounts, mortgages and, yes, credit cards. There’s even a telephone number (855-411-2372), a Twitter account (@CFPB) and a website (ConsumerFinance.gov) where people can report rule-breaking or predatory financial companies. But a visit to the CFPB website reveals evidence of an institutional credit-card bias.
Prominent on the homepage is a graphic depicting a credit card, with the subscript “submit a credit card complaint.” Nowhere is there direct mention of complains about other financial products, and it takes a few clicks through unrelated pages to find a general complaint form. Industry insiders like Odysseas Papadimitriou, founder and CEO of the personal finance website WalletHub.com, see this as a problem.
“The fact that the Consumer Financial Protection Bureau continues to place so much emphasis on monitoring the credit card industry is troubling,” said Papadimitriou. “The CARD Act already eliminated bait-and-switch tactics, increased industry transparency and curbed predatory practices, and as a result the credit card space is now in much better shape than other financial segments. The CFPB needs to alter its focus because it now has bigger fish to fry—prepaid card fees, for example.”
Indeed, prepaid cards are now more important than ever following the implementation of the Durbin Amendment, which capped debit card interchange fees at roughly 24 cents per transaction and left prepaid card fees unregulated. Major banks are now launching prepaid card offerings as a result, with American Express being the latest to do so. Prepaid cards can be viable alternatives to traditional checking accounts given that the only real difference between the two is that you cannot write physical checks with prepaid cards.
Unfortunately for consumers, the lack of regulation extends beyond a prepaid card’s interchange fees. Indeed, prepaid cards have so many different fees that it is often difficult for consumers to effectively compare one prepaid card to another.
“Some cards have a fee for when you sneeze, a fee for when you cough, a fee for breakfast, a fee for lunch and a fee for dinner,” said Papadimitriou, who contends that the CFPB must regulate the number of different prepaid card fees. “Prepaid card companies can charge whatever they want, but as long as consumer can engage in apples-to-apples comparisons of different products, the cream will inevitably rise to the surface and people won’t be duped into using inferior products.”
The CFPB, created by the Dodd-Frank Wall Street Reform and Consumer Protection Act, differentiates itself from the myriad regulatory agencies that predated it by providing a clear line of contact between consumers and federal regulators, thereby allowing for practical solutions to issues that affect Americans on a daily basis. Since more of these issuers now seem non-credit-card related, it would appear that slight adjustments in both priorities and website design are needed from the CFPB.
Perhaps if you feel the same way, a quick call to the new Consumer Financial Protection Bureau hotline is in order.
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