Visa Inc. has announced a new specification for reloadable prepaid providers focused on simplifying fees and disclosures.
Adherents to Visa's new rules, which are not mandatory, will obtain a seal certifying their compliance. The goal is to promote consumer-friendly fees, protections and disclosures, the Foster City, Calif., card network says.
"The prepaid space, and in particular the reloadable prepaid space, has changed so much over the years and over time there has been some concern over fees," says Cecilia Frew, head of U.S. prepaid products at Visa. "There are lots of fees for everyday transactions."
The new Visa specification says that reloadable prepaid cards may have a flat monthly fee. Certified cards will not have fees for declined transactions, customer service, in-network ATM withdrawals and balance inquiries, PIN or signature transactions and cash-back at the point of sale. Any fees the accounts charge must be clearly disclosed to consumers.
Prepaid cards that work under the specification should not have overdraft fees. Recently some prepaid providers have begun charging overdraft fees, Frew says.
"A big part of the value proposition [for prepaid] is that you can only spend what's on the card," says Frew.
To qualify for Visa's seal, providers must also have clear fee disclosures and include consumer protections such as Federal Deposit Insurance Corp. (FDIC) insurance, zero liability and dispute resolution guided by Reg. E.
Some products would not want to obtain the Visa certification, such as pay-as-you-go prepaid cards, which are better for consumers who work seasonally and do not want to commit to a monthly fee, says Frew.
The Visa specification, which has not been named, is focused on consumer reloadable products right now, Frew says, and "the intention is to evolve the product. We're looking at payroll cards right now."
Visa will work to educate consumers on how to differentiate prepaid products based on the presence of the Visa seal. A few companies are close to achieving certification and will be announced in the coming months, Frew says.
Visa is also developing a prepaid clearinghouse service to help curb fraud. The service, which is modeled on similar systems for credit cards, will enable prepaid card issuers and program managers to share data on fraud trends in an effort to spot fraud attempts that span multiple prepaid programs. Participants have until July 2015 to begin submitting fraud data; those who miss Visa's deadline will face fines and other penalties.