Posts tagged ‘prepaid cards’

Five Issues That Will Shape Your Credit Union Week

I haven’t done  one of these in a while but I saw so many important issues to bring to your attention that here is a quick rundown. As longtime readers of the blog know any one of these issues could be the basis for an expanded blog in the future.

How Do You Protect Your At Rest Data?

I’m more than a little surprised that there isn’t more outrage out there stemming from the disclosure that hundreds of millions of Facebook users had their account passwords stored “in plain text and searchable” format  as far back as 2012. This information could be accessed by thousands of Facebook employees.

When New York implemented its cybersecurity regulations, one of the most hotly debated issues was what measures  institutions holding personally identifiable information had to take to make sure it was protected.  While there was broad agreement that information in transit – such as an attachment to an email – should be encrypted,  many institutions argued that it wasn’t necessary or cost-effective to mandate the encryption of data “at rest” provided it was protected by a firewall.

NY 23 NYCRR 500.15 effectively splits the difference. It provides that personal information should be encrypted even at rest unless doing so isn’t feasible and an  institution uses alternative controls yo protect the data. This determination should be based on an individual risk assessment which makes sense since what is feasible for a state chartered credit union isn’t the same as what is feasible   for an entity of the size and sophistication of Facebook.

According to Facebook, there’s no evidence that the information has been misused but in reality  we won’t know that for sure for several years. Besides, even if not a single password was misused, Facebook’s inexcusably incompetent handling of member data is yet another textbook example of why Congress has to act to establish national baseline cybersecurity standard.

Prepaid Card Regulations Effective April 1st

This is just a quick reminder that on April 1st regulations providing consumer protections and imposing disclosure requirements on the issuers of prepaid reloadable cards take effect on April 1st. you can be forgiven for not realizing that these regulations shortly take effect as their effective date has been changed on more than one occasion. Even if your credit union doesn’t offer prepaid cards today, I would certainly familiarize yourself with these requirements. My guess is more and more institutions will start offering prepaid cards in the coming years.

Credit Union Employee Complains of Harassment at GAC

In one of the highest profile criticisms of the credit union industry since the #metoo movement gained steam, Rachel Pross, Chief Risk Officer at MAPS Credit Union in Oregon, has posted a blog detailing inappropriate conduct by attendees at CUNA’s recently ended Governmental Affairs Conference and calling on the industry to do a better job of confronting  harassing behavior: “I would argue that our industry needs to be even more aware and react more swiftly when bad behavior is demonstrated, because we can’t tout our family oriented, not-for-profit, feel-good, opposite-of-Wall-Street, altruistic, people-oriented nature and then behave just like everyone else.”

New York State Budget

The New York State budget is due April 1st and according to Governor Cuomo the parties remain far apart on key issues even though the Senate and Assembly are both controlled by democrats now. Just how far apart? Well, Budget Director Robert Mujica told reporters a couple of weeks ago that an on time budget was virtually impossible and another top aide to the Governor has called an on time budget fantasy.

Why does this matter to credit unions? With marijuana legalization reportedly out of budget negotiations at this point, there aren’t too many issues that will have a direct impact on credit unions when the budget is finalized. But the sooner the budget is resolved, the sooner the focus of the legislative activity will shift to legislative issues including those that are so important to credit unions. Let’s hope that the legislature and Governor put the budget to bed.

What Direction is the Economy Going in?

In truth, no one knows the answer to that question. One sure sign of danger though is that the dreaded inverted yield curve occurred on Friday, scaring the bejeebees out of Wall Street in helping to trigger a sharp decline in stock prices. The yield curve made its appearance just two days after the Fed announced that it does not plan on raising interest rates any time soon. In fact, the Wall Street Journal is reporting this morning that investors increasingly feel that a rate cut is more likely than a rate rise later in the year.

March 25, 2019 at 10:00 am Leave a comment

Here’s What You Really Need To Know

Just like my favorite rapper, T.I. –I’m back baby and better than ever!

If you’re anything like yours truly, you’ve been thinking more about a perfectly cooked roast with creamed spinach than you have about the increasingly bizarre intersection of politics policy and regulation. There’s been some real doozies over the last week and a half so here’s some quick hits on what you missed:


Acting CFPB Director Mick Mulvaney is continuing to move quickly to make a decisive imprint on the CFPB. On December 31st, he announced that the Bureau did not intend to require institutions to resubmit data or assess penalties with respect to information collected in 2018 and reported in 2019 under the Home Mortgage Disclosure Act. In addition, we can expect proposed amendments to the CFPB’s regulations which greatly expanded the amount of data mortgage lenders have to collect starting yesterday.

Keep in mind folks that several of the additional data points collected under HMDA are mandated by the Dodd-Frank Act. In other words, you should still be executing your new and improved HMDA collection activities.

Pre-paid Cards

The Bureau announced that it was delaying the effective date of the pre-paid card rule and that we should expect further amendments to the proposal soon.

Just What Is the Bureau’s Mission Anyway?

The Elizabeth Warren/Bernie Sanders wing of the blogosphere went apoplectic over news that the CFPB had changed its mission to combatting burdensome regulation. Perhaps they should have taken the time to read the Dodd-Frank Act which provides that one of the Bureau’s primary objectives is in fact to do away with regulations that are “outdated, unnecessary, or unduly burdensome.” Wouldn’t it be nice if someday we could have a Bureau that both protects consumers and eliminates unnecessary regulations? But that’s the spiked egg nog talking. By the way, I prefer to put bourbon in mine.


This one was hard to miss. The final tax bill caps the Federal deduction for State and Local taxes at $10,000 which explains why downstate Suburban  and Mid-Hudson  Republicans voted against the bill. Much confusion was created after Governor Cuomo issued an Executive Order allowing localities to accept 2018 taxes in 2017 as a way of avoiding the increased tax hit. The DFS even issued a notice last week encouraging banks and credit unions “that include property taxes in an owner’s monthly mortgage bill or otherwise pay property taxes on behalf of owners.” I’m not quite sure how that would work as many of these taxes haven’t been assessed yet. The IRS responded with this memo putting people on notice clarifying the very limited circumstances under which property taxes can be prepaid. You can expect to hear plenty about the tax legislation in the Governor’s State of the State Address tomorrow.

Fiduciary Rule

New York’s Department of Financial Services has proposed regulation that would impose an enhanced fiduciary obligation on sellers of life insurance and annuities. The Trump Administration’s Department of Labor has delayed similar regulations from taking effect on the Federal level and the DFS is moving to fill the perceived gap. This is yet another example of how states like New York will attempt to counter balance the regulatory actions of the Trump Administration. There’s a 60 day comment period.

Important Effective Dates

The first day of the year is always an important one since many new laws take effect. Here are some of the bigger ones:

Paid Family Leave is now in effect. I hope everyone has been preparing for this one.

Minimum Wage Increase: Remember that this could also impact the amount of money you can freeze when you get a levy or restraint notice on a member’s account.

Finally, an adjustment to the New York State’s Exempt Employee salary level threshold is now law.

January 2, 2018 at 9:29 am 1 comment

Reports of CFPB’s Demise have been greatly exaggerated

Last Thursday, Congressional efforts to kill regulations set by the CFPB extending certain protections currently given to debit cards to pre-paid card holders quietly died; the regulations take affect April 2018. Even if you don’t offer pre-paid cards this speaks volumes about the regulatory environment in which we will find ourselves for years to come.

First, a slight digression since I really enjoy this subject. In 1996 Congress passed and Hillary Clinton’s husband signed into law the Congressional Review Act (5 U.S.C. § 801-808). Under this legislation final regulations must be submitted to congress and it has 60 days – excluding certain breaks- to pass a resolution blocking them from taking effect. Since regulators have way too much power, this statue sounds great, but its bark is much worse than its bite. After all, in order for a regulation to be blocked both houses of congress would have to vote to repeal it, and there is always the possibility of a veto.

With Congress and the presidency in Republican hands, the act has become a potent weapon with which to undue many regulations promulgated in the final days of the Obama administration. Since Donald Trump took office in January (yes it has only been 4 months) Reuter’s reports that congress has used the Congressional Review Act to kill 14 pending regulations.

This brings me back to the CFPB’s prepaid card regulation. In early February, Senator Perdue of Georgia introduced a joint resolution to block the regulation. He complained in a press release that “If the CFPB wants to continue to impose rules and regulations that impact every American’s financial well-being, it must answer to the American people.” In the same press release Senator Cotton of Arkansas called the rule “a disaster for consumers attempting to access prepaid cards,” In short, the regulation seemed like precisely the type of CFPB mandate that the free market, anti-regulation congress would quickly make go away. But on Thursday the deadline for repealing this bill came and went.

Consumer groups are right to point to this failure as a strong indication that the CFPB, or at least the regulations it has promulgated to date, are alive and well. After all, if congress doesn’t have the appetite to repeal an esoteric regulation dealing with a specific segment of the consumer finance market, then hopes of forging a bi-partisan consensus on changes to the CFPB seem doomed.

I have a sneaking suspicion we are seeing a reemergence of the same pattern that has made it so difficult for Republicans to “Repeal and Replace” Obamacare. Republicans were unified in their opposition to Obamacare until they had to explain to their constituents that they would lose coverage under the Republican alternative. Now Republicans might be growing skittish over taking on the CFPB if that means repealing consumer protection regulations that consumers like.

Don’t get me wrong. The pre-paid card rule has its defects. And, with or without changes to the CFPB’s structure, we will eventually have a CFPB director appointed by President Trump. Unfortunately however, needed regulatory changes may not be as a dramatic or come as quickly as we would like to see.

May 17, 2017 at 10:19 am Leave a comment

Important Prepaid Card Guidance Issued

In my ever so humble opinion,  prepaid cards are the most widely used, under regulated financial products in the country.  That’s changing.  The CFPB is examining how best to regulate them and yesterday  federal regulators, including the NCUA,  issued guidance on the applicability of  Customer Identification  requirements to the financial institutions   that issue them.

Of course readers of this blog know that credit unions and banks are responsible for identifying persons for whom they open accounts. The question is:  Do CIP obligations extend to prepaid cards issued by credit unions and banks? The answer depends on the features of the prepaid cards and the role your institution plays in providing them .  Since, as the guidance notes credit unions wishing to offer prepaid cards are  restricted by field of membership constraints, credit unions aren’t as able as banks to get into the prepaid card business.

CIP requirements kick in when a credit union or bank establishes an account relationship. The guidance states that ” When a general purpose prepaid card issued by a bank allows the cardholder to conduct transactions evidencing a formal banking relationship, such as by adding monetary value or accessing credit, the cardholder should be considered to have established an account with the bank for purposes of the CIP rule. Further, the cardholder should be treated as the bank’s customer for purposes of the CIP rule, even if the cardholder is not the named accountholder, but has obtained the card from an intermediary who uses a pooled account with the bank to fund bank-issued cards “ In addition, there is no requirement that a card be tangible.  It could be purchased off a website and downloaded to your member’s smartphone.

If a prepaid card is an account, who is responsible for implementing CIP requirements? The short answer is that any financial institution issuing a prepaid card “account” is ultimately responsible for complying with CIP requirements but it may contract with third- parties to execute this responsibility provided that it exercises  oversight over its vendor. Where a prepaid card has to be activated by a member the guidance advises that the activator (my word) carry out the CIP.

There are many types of prepaid cards ranging from payroll cards-in which an employer opens up a master account from which employee salaries are placed on individual debit cards-to government benefit cards. Does this mean that CIP must be performed on every cardholder? It depends. For example The guidance explains that if only  an  employer has access to the master account than the issuing  institution must only perform CIP on the employer.  In contrast if a government benefit card allows the cardholder  to load funds other than government funds onto the card than an account relationship is established and the receiver of the benefits must be identified.

Here is a link:


Payday Lending

A good article in this Morning’s American Banker succinctly summarizes the  predicament the CFPB finds itself in as it continues to work on a proposed regulation restricting payday loans .

“If the agency goes too far in restricting short-term, small-dollar loans, there will be a huge backlash from payday lenders and on Capitol Hill, from both Republicans and Democrats. But if the agency fails to stop the most abusive practices, consumer groups will view the first national standards on payday loans as a failure. A chief concern is what will replace payday lenders if federal regulations force many to shut down.”


March 22, 2016 at 9:06 am Leave a comment

What to do About the Invisible Man

There are 26 million Americans who engage in so little financial activity that they are invisible to the Credit Reporting Agencies, according to a report released by the CFPB Tuesday. The reports indicates that while many of the invisibles are young, a disproportionate number of them are clustered in poor, minority neighborhoods. What the CFPB could not report on, and what I think is a huge piece of the puzzle, is how many of these invisibles are using financial tools such as pre-paid cards and payday lenders. What do we make of this research? I’m not quite sure.

In a worst case scenario, 26 million Americans don’t have access to the most basic building blocks of our economy. When I think of my own uncles and grandparents coming over from Germany in the 1920s, I think of cleaning ladies who stashed away nest eggs and husbands who were able to start small businesses in Brooklyn. We’re not talking titans of industry. For these individuals, their advancement to the middle class would have been impossible without access to a bank.

Flash forward to the modern day. In a best case scenario, pre-paid cards will become a large enough part of the financial mainstream so that new ways of assessing credit will shortly be developed and marketed. This is already happening. Big Data is so intrusive that algorithms are already being developed to assess the likelihood that someone would repay a loan based on activities that seemingly have little to do with traditional banking.

But let’s say the report reflects a more disturbing trend. If you believe, as I do, that America has to be the land of opportunity in order to be America, then any institutional impediments to upward mobility have to be eliminated to the fullest extent possible. If pre-paid cards become gateways to an individual’s first banking account and a more sophisticated credit history, then they can do much good. But in a worst case scenario, what the CFPB’s report underscores is that we are institutionalizing a system of financial haves and have nots. My relatives had to go to a bank to deposit a check, there wasn’t an alternative.

Today, it is too easy for the young consumer or new immigrant to avoid traditional banking all together. At the end of the day, a prepaid card isn’t the way to get a college loan. Any discussion of inequality and mobility has to include a discussion of how best to entice poor people into the financial system.

May 7, 2015 at 7:47 am Leave a comment

Banks? We Don’t Need No Stinking Banks!

That seems to be the attitude of many millennials based on the number of surveys that consistently report that those born between 1982 to 2000 are at best indifferent and at worst skeptical when it comes to financial institutions.

For example, according to recent research conducted by Goldman-Sachs, 33% of millennials don’t think they will need a bank in the near future. In addition, 50% of the surveyed millennials are counting on tech startups to overhaul banks. Interestingly, this group is not only skeptical of banking, but profoundly impacted by the Great Recession. According to this survey, less than half of them have a credit card.

This is consistent with what I’ve described in previous blogs: a generation that will make its banking relationship decisions in a vastly different way than any previous generation. In addition, this is a generation that is more than willing to scrap traditional banking models. After all, Facebook announced recently that it is debuting an App to allow its users to make account to account transfers. Can you imagine the previous generation so willing to transfer cash without breaking out the checkbook or walking down to the bank.

I came across this survey as I was taking one more look at a proposal by the CFPB to make reloadable general purpose prepaid cards subject to Regulation E. I just can’t make up my mind when it comes to the proper role of regulation and the prepaid card. On the one hand, as an advocate for credit unions, it makes sense that as prepaid cards provide consumers with almost all the same benefits they get from a traditional banking accounts and debit cards that these accounts be subject to the same regulatory requirements such as disclosures and overdraft protections. On the other hand, the growth in prepaid cards reflects, in part, a generational shift away from traditional banking. Like them or not, the availability of these cards in stores such as Walmart have provided access to financial products for a group of people who may have otherwise chosen to forego or at least delay entering traditional banking relationships.

My concern is that by making prepaid cards more like traditional accounts from a regulatory perspective, we run the risk of squelching innovation. Rather than imposing traditional account regulations on prepaid cards, let’s assume that in the aggregate your average consumer opting for the prepaid card knows what he or she is doing, and is willing to take the risk in return for a different kind of consumer product. After all, from a generational standpoint, millennials have seen what traditional banking can do to their parents. Who can blame them if they are not all that impressed.


HSBC became the latest investment bank to be sued by NCUA over its alleged failure to properly scrutinize mortgage-backed securities purchased by bankrupt corporates. This time, NCUA is headed to Manhattan Federal Court.

HSBC was a trustee for 37 trusts that issued residential mortgage-backed securities. As with almost all its other cases, NCUA is arguing that HSBC breached its fiduciary obligation to properly assess the quality of the mortgages it used to create these securities. As alleged in the complaint, “an overwhelming number of events alerted defendants to the fact that the trusts suffered from enormous problems, yet it did nothing.” Money recovered in these and other lawsuits after legal payouts will be used to reduce credit union costs related to losses to the Share Insurance Fund.

March 23, 2015 at 8:42 am 1 comment

AMEX Serve Card: Message for Credit Unions

The incremental but inevitable evolution of banking away from the traditional branch model took another important step yesterday with the announcement that American Express will now be offering its Serve, prepaid, reloadable plastic card at WalMart stores nationwide.  This means that people will be able to walk up to cash registers at WalMart and reload cards from which many basic banking services can be performed.  They can do all these banking services without ever having to bother going into a credit union and American Express has so far introduced a model with surprisingly low fees compared to prepaid card competitors and many bank accounts.

News like this combined with the announcement that Facebook is moving more aggressively into electronic fund transfers demonstrates that traditional retail businesses as well as cutting edge, high tech companies have looked at the traditional financial services model and decided that there is a much better way of doing business.  American Express is positioning its existing prepaid card, BlueBird, as the card for the “unhappily banked” and positioning its Serve card as the financial choice of the “unbanked.”

What makes AmEx’s announcement all the more important for credit unions is that it is coupling the expansion of its prepaid card network with an advertising campaign directed precisely at the type of people that credit unions have traditionally sought to serve.  According to its press release, you will soon be seeing documentary style commercials in which American Express chronicles the travails of “a handful of hopeful Americans as they navigate their way through an antiquated financial system that can inhibit, rather than help people’s ability to access, move and manage money as well as save for the future.”

The tone of the commercial I watched on YouTube demonstrates just how far behind the times credit unions are when it comes to explaining why they are relevant to consumers.  Why is American Express, once the unabashed embodiment of establishment stuffy, better able to articulate the angst felt by many middle and working class Americans and demonstrate how its financial offerings can help meet their needs while credit unions remain wedded to vacuous platitudes?

If I sound frustrated it is because I am, but only because I still think there is time for credit unions to position themselves in this new environment.  For instance, prepaid cards might be convenient but a debit card offers a heck of a lot more convenience and safety.  In addition, while I can see the convenience of prepaid cards for the parent sending their kid off to college, what concerns me about these products is that they encourage precisely those people who most need to establish credit to stay out of the traditional financial system.  No one with financial difficulty is going to better their condition by living paycheck to paycheck.

American Express’s foray into prepaid cards demonstrates that there is still a huge market of unbanked consumers in desperate need of reasonably priced financial products.  Credit unions are the most logical place for these consumers to go but unless the industry starts doing a better job of explaining how its services are better suited for them and updating its products to reflect the changing times, we risk losing one of the primary reasons for our existence.

April 22, 2014 at 8:52 am 4 comments

Ending The Benefit Card Monopoly

imagesThe National Consumer Law Center recently released a survey on the use of pre-paid cards to provide unemployment benefits.  With the use of government benefit program pre-paid cards growing, it’s time for credit unions to start complaining loudly and clearly about these programs, which amount to state sanctioned monopolies granted to banks to provide services to people whom credit unions are often best positioned to serve.  I wouldn’t be as concerned if prepaid card programs were limited to unemployment benefits but the use of these programs is becoming an increasingly important means of providing funds to all benefit recipients.

According to the NCLC, there are currently 40 states, including New York, that use prepaid cards to provide unemployment compensation.  Six of those states, including California, do not offer direct deposit as an alternative to prepaid cards, even though federal law requires that recipients be given a direct deposit option.  Only three states provide recipients with a prepaid card option, a direct deposit option and the option to receive a check.  An appendix provided in the report provides a state-by-state assessment of the programs.  The Center is neutral on New York’s program, which it describes as providing “ample access to information [account information] and numerous opportunities to withdraw funds for free” but noted it could be improved by eliminating fees such as those charged for denied transactions.

Although the report analyzes unemployment benefits, its conclusions undoubtedly reflect larger trends since so many state level benefits can now be provided with pre-paid cards.  In preparing this report, the NCLC is primarily concerned that recipients don’t have much needed funds chipped away with unnecessary fees.  For instance, only 18 states grant between two to five free in-network withdrawals per month, and only 11 states grant one or more free withdrawals per deposit.  While I share this concern, another one that should be added to the list is a public policy that grants a handful of large banks a monopoly over public funds and does so at the expense of recipients most in need of banking services that go beyond a simple debit card.  In 2009, the U.S. Department of Labor even recommended that payment of unemployment benefits be made by direct deposit rather than debit cards for individuals with bank accounts and urged states to offer the direct deposit alternative as soon as possible.

I think the DOL should take it one step further and mandate that recipients not only of unemployment benefits but all government benefits presumptively choose direct deposits over prepaid cards.  According to the report, the use of direct deposit in lieu of prepaid cards varies widely.  Minnesota has the highest direct deposit rate at 82%, while Arizona has the lowest at 16%.  Some states even presumptively enroll recipients in prepaid debit programs, meaning that the recipient has to opt out and choose direct deposit.  What about the individual who doesn’t have a bank account?  Well, in states like New York financial institutions are already required to offer life line banking accounts and tying direct deposits to opening such accounts is a great way to get the unbanked connected to a financial institution be it a credit union, community bank or one of the behemoths.  Perhaps the banks that administer these programs would provide us with information on the percentage of prepaid card recipients who go on to open accounts at their institutions.  Maybe these programs provide an important gateway to financial independence.  Somehow, I doubt it.

January 30, 2013 at 8:08 am 1 comment

Are Prepaid Cards Friend or Foe to Credit Union Industry?

Yesterday, Richard Cordray and other top officials of the CFPB took a road trip to Durham, North Carolina where they held a hearing on the regulation on what the Bureau is describing as general purpose reloadable prepaid cards (GPR).  The Bureau also released and Advanced Notice of Proposed Rulemaking on the regulation of these products.

The question is not if, but to what extent these financial products will be regulated by the CFPB.  As summarized by Mr. Cordray in his opening remarks, “we have a duty to make sure that these products are safe for consumers and that prepaid card issuers do not make money by relying on tricks or traps that are unsustainable for card holders.”  Translated into regulation, this means that the CFPB is considering mandating that these accounts are eligible for insurance coverage, that disclosures explain fees, and other expenses such as overdraft charges that reduce the value of the card, and that members have protection against loss, damage or theft of the card.  In other words, to what extent should these cards be treated just like traditional debit cards for regulatory purposes. 

To me, the industry’s response to this proposal centers on one key question:  can these cards be designed as gateways to integrating people into the credit union or are they going to be used and marketed to consumers as alternatives to traditional banking?  If it ends up being the former, then anything that helps the underbanked overcome their fear of financial services is good for them and good for the industry.  If it ends up being the latter, then these products will cater to the creation of a two-tier financial system with people on the lowest end of the economic ladder discouraged from opening an account, which encourages savings, creates credit and is still the safest place to keep your hard-earned cash.

NCUA releases monthly economic overview

NCUA Chief Economist John Worth has released his latest video overview of the nation’s economy and how its trends are impacting credit unions.  I’ve joked about these presentations in the past, but I actually do think they are an excellent resource and use of technology.  Here’s the link

May 24, 2012 at 7:30 am Leave a comment

We’ll always have Paris

I like Suze Orman, she has a terrific smile which greets me warmly every time I click on NCUA’s website.  So none of this is personal.  She recently introduced a new prepaid card and, from what I can tell, she has crafted a product that is actually designed to help consumers as opposed to simply rip them off (calling the Kardashians).  Nevertheless, prepaid cards are a bad idea whose time should never come.

According to the FDIC, there are an estimated 9 million American households that don’t have access to banking accounts and 21 million American households rely on institutions such as payday lenders and check cashers for financial services.  There has been a lot of talk about income inequality lately, and I can think of no better way of exacerbating that than encouraging poor and/or young consumers to avoid the hassle of opening a traditional bank account or joining a credit union and instead simply sticking their paycheck on a card.  Is this convenient? Absolutely.  Can it be done fairly? At least in the short-term, yes.  But does anyone honestly think that someone can start building a nest egg to own a house or to afford a rental in a better neighborhood without putting their money in a traditional financial institution? Ultimately, anyone with any kind of dream for the future has to obtain both credit and financial competency.  How is someone going to get a student loan or a first mortgage by using a prepaid card?

There are consumer friendly alternatives to these cards.  For instance, in New York State, financial institutions must offer “basic banking accounts” with minimal account requirements of no more than $25 and up to eight free withdrawals a month and a maximum account fee of no more than $3.00 per month.  These accounts, by definition, are going to be better protected under the law than any prepaid card. Furthermore, forcing the timid consumer to go into a credit union ensures that they begin to demystify a financial system which, for all its defects, must be successfully navigated by anyone wishing to realize their American dream to the fullest extent possible.

It seems like Mrs. Orman has gone out of her way to craft a reasonably priced consumer product and she definitely has the profile to keep her partners in line.  But my concern is not with what her card looks like today, but what your average prepaid card will look like five years from now.  Now that the industry has the imprimatur of a major financial celebrity, I expect to see a proliferation of cards with exorbitant fees and disclosures for which one will need a degree in hieroglyphics to understand.  When these really take off, they will become sanitized versions of licensed check cashers.

There are some serious defects with the current financial system, but implicitly encouraging people to dump the system altogether is not the way to go. 




January 11, 2012 at 7:03 am Leave a comment

Authored By:

Henry Meier, Esq., Senior Vice President, General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

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