Visa isn’t waiting for regulators to help simplify prepaid products for consumers. Ahead of the CFPB’s NPR on general purpose prepaid cards, expected later this summer, Visa Inc. today announced it will begin designating prepaid products that meet specific standards for simplicity, transparency and consumer protection.
The voluntary standards draw upon Visa consumer research and collaboration with issuing and program manager partners as well as thought leaders at the Center for Financial Services Innovation (CFSI) and The Pew Charitable Trusts.
“There’s so much noise surrounding reloadable prepaid cards, and there continues to be consumer confusion,” Cecilia Frew, head of U.S. prepaid products, Visa, tells Paybefore. “This is really our attempt to create some clarity around the benefits, protections and fees associated with prepaid cards.”
Frew says some Visa partners already meet the standards, which she expects will change over time—Visa wants to leave room for innovation. The industry, however, often has been reactive when it comes to dealing with negative press and policymaker scrutiny as we saw with payroll cards last year.
“We want to get proactive and tell our story, which is helpful not just for how regulators and consumer advocates perceive us but also for helping consumers understand how prepaid cards can benefit them—whether they’re underserved or not,” she continues. “Unless we clear away the noise, we’re not going to realize our potential to reach millions more consumers with prepaid products.”
To qualify for the new Visa prepaid designation—the name of which is still in development—programs must have:
1. Simplified fee structures and disclosures
- A flat monthly fee that includes all basic day-to-day activities. (Actual fees may vary.) Consumers will not be charged for:
- Transaction decline
- Customer service fees
- In-network ATM withdrawal or balance inquiry fee
- PIN or signature transaction fees
- Cash back at POS fees
- No overdraft coverage
- Consumer-friendly communication of fees (e.g., fee box and disclosures)
- Cost management tips: Quick-use guide for consumers to find the best ways to use the product for the lowest cost
2. The best consumer protections
- FDIC/NCUA pass-through deposit insurance required
- Consumer protections and dispute resolution rights (Reg. E, as applied to payroll cards)
- All cards covered under Visa’s Zero Liability policy
- Access to Visa’s Prepaid Clearinghouse Service for better fraud protection
Opportunities for consumers to improve their financial health, such as financial education, budgeting tools and savings purses, will be added in the future.
“We applaud Visa’s efforts to raise the bar on quality in the prepaid industry by building on our Compass Principles,” said Jennifer Tescher, president and CEO of CFSI. “Their efforts are vital because millions of Americans are searching for tools to help them reduce financial friction, and prepaid debit cards can be a valuable option. We look forward to continuing to work with Visa to design and test new prepaid features and options that enable consumers to spend, save, borrow and plan effectively.”
Frew says partner feedback has been positive and she expects products bearing the Visa prepaid next-generation seal will be out by the end of the year.
See related stories:
- Prepaid Earns High Marks on CFSI Scorecard
- CFSI Issues Prepaid Guide for Compass Principles
- MasterCard Sets New Payroll Card Standards Beginning in 2014