Senator to push limits on fees for prepaid debit cards
Sen. Richard J. Durbin (D-Ill.), who led the fight to regulate debit-card "swipe" fees, said he will seek similar rules to restrict what he called "abusive fees" associated with prepaid cards.
In a letter to Elizabeth Warren, the Obama administration adviser setting up the Consumer Financial Protection Bureau, Durbin promised "further legislative steps" to cut fees tied to prepaid debit cards, according to a copy of the letter released this week.
Durbin said he would work with Sen. Robert Menendez (D-N.J.), who introduced legislation on Dec. 17 that would place disclosure requirements and fee limits on the cards.
"In the meantime, I urge the Bureau to closely monitor the market, fees and terms of these products, and to alert businesses and consumers about deceptive and abusive products," Durbin wrote in the letter. Peter Jackson, a spokesman for Warren, declined to comment on the letter.
Prepaid debit cards, designed to function like checking accounts, have been faulted for charging consumers fees for activation, checking balances and other functions.
Durbin successfully pushed for an amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act that requires regulators to ensure that debit-card swipe fees paid by retailers to card issuers are "reasonable and proportional to the cost incurred by the issuer." The senator's new effort aims to address the law's exemption for most prepaid debit cards.
Trish Wexler, a spokeswoman for the Electronic Payments Coalition, said fees for the prepaid cards are important to the products' viability. "You can't expect to force a business to offer a product at a loss, period," Wexler wrote in an e-mail on behalf of the coalition, which represents card issuers including Bank of America and J.P. Morgan Chase as well as payment network operators such as Visa and MasterCard.
Warren, an assistant to President Obama and special adviser to Treasury Secretary Timothy F. Geithner, is charged with setting up the new bureau created by the Dodd-Frank Act. The bureau will have no formal authority until July 21.
Hip-hop impresario Russell Simmons, who markets a prepaid debit card called the RushCard, successfully lobbied Congress to exempt the cards from the swipe-fee regulation.
- Bloomberg News