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PROMOTING SAFETY AND TRANSPARENCY IN PREPAID

The Consumer Financial Protection Bureau (CFPB) is taking steps to protect consumers in the prepaid market

by launching a rulemaking process aimed at promoting safety and transparency. 

Prepaid by the Numbers

• $57 Billion: estimated amount loaded onto prepaid cards in 2011

• 42 percent: growth rate per year of prepaid market from 2010-2014

• $167 Billion: projected total dollars loaded onto prepaid cards by 2014

Overview

• Prepaid cards aren’t just gift cards anymore. Certain prepaid cards -- known in the industry as General 

Purpose Reloadable, or GPR cards and referred to here simply as “prepaid cards” -- allow consumers to load 

their own money onto the cards repeatedly and use the cards wherever their network brand (Visa, 

MasterCard, Discover and American Express) is accepted.

• Prepaid cards are growing quickly. Consumers loaded approximately $57 billion onto prepaid cards in 2011.

The dollar load onto prepaid cards is expected to grow by 42 percent per year from 2010-2014 according to 

Mercator Advisory Group1

. It is projected to reach approximately $82 billion in 2012, $117 billion in 2013 

and $167 billion in 2014. According to 2009 FDIC data, 9.7 percent of all households have used prepaid 

cards. 

• Consumers may be using prepaid cards as alternatives to checking accounts. Many cards have the option 

to receive direct deposit, withdraw cash at ATMs, and access account information online. Whether because 

some consumers cannot get a checking account or because they prefer to use a prepaid card, prepaid card 

users are increasingly choosing the direct deposit option. The second largest prepaid card program manager

in the country reported that nearly 42 percent of its cardholders had direct deposit as of December 31, 

2011. In December 2007, that number was only 14 percent.

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• The CFPB launched a rulemaking process aimed at adopting the first-ever federal consumer protections 

for prepaid cards. Currently, prepaid cards do not enjoy the same protection under federal law as debit 

cards linked to a checking account. Through an Advance Notice of Proposed Rulemaking, the Bureau is 

seeking input on ways to help ensure that consumers’ funds on prepaid cards are safe and that card terms 

and fees are transparent. To help consumers better understand prepaid cards, the Bureau is also launching 

Ask CFPB: Prepaid Cards – a searchable database with easy-to-understand answers to more than 80 

consumer questions. 

 1 Mercator Advisory Group, Prepaid Card Market Forecast, November 2011. 2 NetSpend Holdings, Inc. Form 10-K, filed February 4, 2012 for the period ending December 31, 2011, available at

http://files.shareholder.com/downloads/ABEA-56BIQV/1684506713x0xS1047469-12-1472/1496623/filing.pdf; NetSpend 

Holdings, Inc. Form 10-K, filed March 2, 2011 for the period ending December 31, 2010, available at

http://files.shareholder.com/downloads/ABEA-56BIQV/1684506713x0xS1047469-11-1638/1496623/filing.pdf.
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Areas of Focus for the CFPB

Given the rapid growth of the prepaid market and projections for continued growth, the Bureau intends to 

evaluate and eventually address the potential risks to consumers.

• Disclosure 

o Fees and Terms Disclosure: The lack of an industry-wide standard on prepaid card fee disclosure may 

make it difficult for consumers to understand the cost of the product or to compare fees. Often, 

consumers do not know what protections or fees come along with their prepaid card prior to purchase 

because such disclosures are contained inside the packaging. Consumers need to be able to comparison 

shop in order to make a well-informed decision. The Bureau will evaluate the best way to balance the 

need for disclosure with the fact that many cards are purchased at retail locations and space for 

disclosures is limited. 

o FDIC Insurance: When consumers place their money into a bank account, they take the safety of their 

funds for granted because of federal insurance. But prepaid cardholders are not necessarily guaranteed 

this protection. The Bureau plans to evaluate how prepaid card issuers should disclose the insurance 

status of cardholders’ funds. 

• Unauthorized Transactions: Federal regulations require that credit and debit card issuers limit consumers’ 

liability when their cards are used without their authorization. These regulations do not extend to prepaid 

cards. Many prepaid cards do offer this protection, but it is not standard across the industry. The Bureau 

will evaluate the costs and benefits of card issuers providing limited liability protection from unauthorized 

transactions.

• Features

o Credit: Most prepaid cards do not offer any credit features. In general, cardholders may not be able to 

withdraw or spend more than the funds loaded on their cards. However, some prepaid cards allow their 

cardholders to overdraw their accounts, and some offer small-dollar loans or a line of credit. The CFPB is 

looking for public input on the costs, benefits, and consumer protection issues related to credit features.

o Savings: Few prepaid cards have a savings account. Even though such savings accounts typically pay 

interest, consumers do not seem to take advantage of the opportunity to save. The CFPB is looking for 

public input on the costs, benefits, and consumer protection issues related to savings features.

o Credit Repair: Some prepaid cards include a feature that claims to offer consumers the opportunity to 

improve or build credit. Consumers generally need to opt in to this feature, which involves the reporting 

of certain information to credit reporting agencies. The Bureau is interested in learning more about this 

feature.