N.J. Sen. Menendez Going After Prepaid Debit Cards
PARAMUS, N.J. (CBS 2/WCBS 880) — Consumers are crying foul over prepaid debit cards that often contain fees that eat up a big chunk of the card’s value.
Now, a local lawmaker is proposing some tough regulations on the card industry.
The problem of excessive fees on prepaid debit cards existed long before the Kardashian sisters decided last week to abandon their effort to market their prepaid “Kardashian Kard,” which were criticized as having “pernicious and predatory fees.”
But unfair fees are no secret to consumers like Catherine Shahinian of Tewksbury, N.J., whose daughter got a prepaid card for her birthday.
“To buy the card was $5. If you got a $30 card, you’re better off giving $35 in cash, save five bucks and just give the money,” Shahinian said.
Shahinian was in Paramus to give support to Sen. Robert Menendez, who is introducing a bill to protect consumers from these fees.
“My legislation would eliminate the most egregious fees and give consumers full disclosure,” Sen. Menendez told CBS 2’s John Metaxas.
The fees on the Kardashian card were especially egregious, including up to $100 to initiate the card, on top of monthly fees, fees for ATM withdrawals, balance inquiries, customer service calls, even a $6 fee to cancel the card or a $10 fee to replace it.
Most prepaid debit cards seem to have some kind of fee.
Metaxas bought this Wal-Mart money card on Monday in Saddle Brook and loaded $40 onto it. Wal-Mart charged him $43, including a $3 issuance fee. The cardholder agreement also said Wal-Mart would charge another $3 when Metaxas activated the card, meaning it would cost him $6 before he even bought anything.
Consumers Union reports these fees can add up. It estimates the “Rush Card” pay-as-you-go program could cost a typical user more than $43 in fees in the first month, the “Account Now” prepaid card more than $17.
Consumers told Metaxas they welcome more information and protection.
“People don’t know. They just don’t know what the fees are,” said Roberto Ferman of Mahwah.
Until protections are enacted, the advice here is be an informed consumer. Find out what the fees are before you get the card.
Menendez pointed out prepaid debit cards are different from gift cards. In addition to banning some fees and requiring more disclosure, his bill would protect consumers from loss or theft of the cards and provide FDIC insurance.