TRENTON – A bill intended to cut through the “maze of hidden fees that have cropped up in the growing and lucrative prepaid debit card industry” was submitted in the Assembly this week.
The legislation, A2144, would regulate prepaid debit accounts by limiting the fees that may be charged in connection with the accounts and requiring financial institutions holding prepaid debit accounts to disclose certain information to consumers.
The bill is sponsored by Assemblywoman Linda Stender, (D-22), Fanwood; and Assemblymen Troy Singleton, (D-7), Willingboro; and Benjie Wimberly, (D-35), Paterson. The Senate version will be sponsored by state Sen. Nicholas Scutari, (D-22), Linden, but has not yet been introduced.
The legislation was inspired by numerous reported accounts of the “exorbitant hidden fees” that, in some cases, depleted “a great deal of the funds deposited by hard-working, low-income consumers,” according to a press release. Meanwhile, the industry continues to blossom, with analysts predicting that over $200 billion will be loaded onto prepaid debit cards this year by consumers, according to sponsors.
“The pre-paid debit card industry has been described as the Wild West where very few regulations exist,” Stender said. “Low-income families and struggling students are among those that rely heavily on these types of cards. Without disclosure and accountability, this industry will continue to prey on the young and the poor.”
Scutari called the fee schedules “predatory tactics” and called for disclosure and a limit on the type of fees and the frequency with which they are charged. The bill would prohibit a financial institution from charging an activation or enrollment fee or any other fee that is not expressly permitted by the bill.
Singleton added, “This measure will provide a one-two punch to regulate both excessive fees and the current lack of disclosure that consumers must contend with.”
The bill would require financial institutions to provide a consumer whose funds are contained in a prepaid debit account with a monthly account statement that sets forth certain details for each electronic fund transfer during that month. A financial institution would be exempted from this requirement if it provides consumers with certain information on an ongoing basis, such as access to the account balance through the Internet, telephone, and automated teller machines, as well as a means to contact customer service and request an account statement.
The bill would also require financial institutions to provide consumers with a table of any fees that may be charged in connection with the prepaid debit account and an estimate of the average total monthly cost to a typical consumer for using a prepaid debit account, together with any application, offer, or solicitation for a prepaid debit account.
Additionally, a financial institution must also provide a wallet-sized summary of any fees that may be charged in connection with the prepaid debit account and a toll-free telephone number for customer service relating to the prepaid debit account, and, on the access device, a toll-free telephone number and website at which the consumer may access a clear and conspicuous disclosure of the fees that may be charged in connection with the prepaid debit account.
Any person found to be in violation of the bill would be subject to a civil penalty of up to $1,000 per day for each day that the person is in violation.
The Democratic sponsors also applauded U.S. Sen. Bob Menendez, (D-NJ), for his federal efforts to pass the “Prepaid Card Consumer Protection Act,” which would limit fees consumers who use these cards can be hit with and ensuring that consumers can get their money back if their card is lost or stolen.