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Prepaid cards are a booming business. They're like debit cards and especially attractive to people who don't have bank accounts. Today the Consumer Financial Protection Bureau issued new rules it says will extend protections that apply to credit and debit cards to prepaid cards as well. NPR's Yuki Noguchi reports.
YUKI NOGUCHI, BYLINE: Prepaid cards have gone from a relatively small industry a decade ago to one the CFPB says will reach more than a hundred billion dollars in just a couple years. The cards can be used for various purposes from disbursement of payroll or benefits to gift cards.
According to Pew Charitable Trusts, nearly half of users say they rely on prepaid cards to avoid overdraft and other fees. The watchdog agency says because prepaid cards are similar to debit cards, they should also carry similar protections. Here it explains the rules in a video.
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UNIDENTIFIED WOMAN: Under the new rule, you'll be able to easily monitor your account for free, and your money will generally be protected.
NOGUCHI: Among other things, the new rules will require card providers to assess a person's ability to repay and cap fees and interest rates. Brad Fauss, president of the National Branded Prepaid Card Association, says he has several concerns. Among them...
BRAD FAUSS: Requiring a credit underwriting for those consumers, it's going to make it much more challenging to continue to offer the product.
NOGUCHI: And he says that will limit consumer choice. The new rules are set to take effect October of next year. Yuki Noguchi, NPR News, Washington. Transcript provided by NPR, Copyright NPR.
