Prepaying Our Way Out of the Recession

Five words or less(NewsUSA) – As signs suggest a slowly improving economy, all Americans agree -; we never want to see another large recession.
Consumers are learning to live within their means. The Obama Administration is considering creation of a new government agency to better protect consumer interests.
There is a huge risk, however, that lawmakers may unwittingly limit access to one of the more important elements for consumer recovery -; network branded prepaid cards.
People need financial products that help them spend within their means. With prepaid cards, you can’t spend more money than you put on the card, so it’s easy to stick to a budget and not over-spend.
Prepaid cards also allow those Americans who cannot qualify for credit cards to carry something other than cash. Prepaid cards give a level of security that cash cannot, and offer valuable consumer protections. According to a study conducted by the Office of the Comptroller of the Currency, prepaid payroll cards are less costly than check-cashing services or low-balance checking accounts.
In the wake of the housing collapse and credit crisis, the government must strengthen consumer protections. However, new regulations should not prevent Americans from buying helpful financial products.
For example, new laws could limit access or increase costs for prepaid cards. Some suggested regulations would deem prepaid cards “deposit-taking” mechanisms. As such, prepaid cards could only be sold at bank branches. This would disproportionately penalize the millions of Americans without bank accounts.
Other seemingly innocent requirements would require companies to send paper statements, even if consumers prefer e-mail or text messages. Still other proposals would punt regulation to the states, allowing a patchwork of state-by-state rules that would serve a limited interest. As is already the case in some states, such as Vermont, state laws could become so prohibitive that they force companies to take their products off the shelf, limiting consumer access.
Regulatory changes need to be weighed against their economic impact and aligned with the way consumers use financial products. Without that balanced view, well-intentioned policy changes could prevent Americans from using tools like prepaid credit cards to control their spending.

Kirsten Trusko is the Executive Director of the Network Branded Prepaid Card Association (NBPCA), an inter-industry trade association that works to advance network branded prepaid cards.

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