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A consumer group concerned about the multiple fees associated with prepaid cards is asking for the same consumer protections that apply to traditional debit cards. In the report "Prepaid Cards: Second-Tier Bank Account Substitutes," Consumers Union staff attorney Michelle Jun writes that prepaid cards can be inferior to debit cards tied to checking accounts because the costs can be high and confusing, and multiple fees often apply. Moreover, not all prepaid cards provide adequate protection against theft of funds using the cards or card account numbers, he says. Prepaid card issuers should provide fee information in a simple, comprehensive chart, Jun suggests. "Oftentimes you go to [issuer's] Web sites, … and you don't find the fees upfront and center, and there are a lot of them," Jun tells CardLine sister publication ATM&Debit News. Issuers should cap the cost of using the cards monthly, writes Jun, who contends consumer protections on prepaid cards should be equal to those of traditional debit cards. Though consumers often view prepaid as products for the unbanked and underbanked population, the recession has led to use among consumers from all demographics. "Regardless of what population you're looking at, all consumers would be totally confused about the fees these prepaid cards have, mostly because they are not displayed prominently anywhere," Jun says. Jerry Welch, CEO of Tampa, Fla.-based prepaid card provider nFinanSe Inc., says Consumer Union points out some obvious issues in the industry. "There are a lot of practices that are going on now that are not going to get traction that ultimately consumers are going to push back on because it's not fair," Welch says. Prepaid card providers have lowered fees this year, however. In February, Wal-Mart Stores Inc. reduced its upfront, reloading and monthly maintenance fees to $3 each (CardLine, 3/16). Green Dot Corp. and nFinanSe followed suit with their own price reductions. But that has not been enough to satisfy Consumer Union, which believes the Federal Reserve Board should expand Regulation E of the Electronic Funds Transfer Act to include all reloadable prepaid cards and reloadable gift cards that carry balances of at least $250, Jun says. But Welch believes such government regulations are unnecessary because consumers ultimately will force change based on their choices. "The consumer is going to vote, and I just don't see that having high fees, and hidden fees, and poor customer service is going to win the consumer," he says.

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