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On March 1, the CFPB released an Issue Spotlight exploring the challenges that recipients of public benefits programs offering cash assistance face when accessing funds through financial products or services. According to the report, financial products used to deliver public benefits, such as Social Security and unemployment compensation, are delivered through various methods—particularly prepaid cards—that may subject consumers to high fees and reduce the amount of funds the individual is able to receive.
The Bureau noted that some prepaid cards charge numerous fees that cut away at a consumer’s available funds. According to the Federal Reserve, $1.3 billion in transaction fees (including maintenance, balance inquiry, customer service, or ATM fees) were collected by prepaid card administrators in 2020. The report also found that due to significant variations in program structure and delivery at the state and county level, the amount and types of fees charged to access cash assistance vary. Additionally, inadequate and untimely customer service often prevents consumers from being able to correct problems with their accounts or access funds, the report said. Consumers highlighted concerns such as having inadequate protections against unauthorized transfers, paying high costs to replace a card, and experiencing insufficient or hypersensitive fraud filters that cause delays and account freezing. The report also flagged concerns about consumers being told to use a prepaid card issued by a particular financial institution, rather than being allowed to deposit funds into an account at an institution of their choice, thereby limiting competition.
The Bureau said it will continue to monitor and take action against entities who violate federal consumer financial protection laws and will share the report’s findings with federal and state agencies that administer public benefits programs.