I would encourage the CFPB to focus their energies on advancing the road to credit concept instead of focusing on how to restrict credit. 

With that perspective, the CFPB prepaid announcements were hardly inspiring for either financial institutions or the credit seeking public. The CFPB should consider progressive policies that create incentives for prepaid card issuers to build and experiment with programs that result in credit being responsibly extended to those who are not obvious candidates for credit. 

Although the CFPB is providing a valuable service by standardizing consumer protections, these protections do nothing to advance the democratization of affordable credit.  Prepaid is a viable launch pad to introduce credit to a population that is difficult to reach, and that should be fostered and supported.

In our work helping financial institutions, non-banks, retailers and government agencies to design and launch payment solutions for lower income people for several years, we have found  reloadable prepaid cards have been a tremendous innovation for the working poor, saving people hundreds of dollars annually in overdraft fees, as well as providing a tool for transacting in the 21st century. 

For the person accustomed to hiding cash in their bed mattress, the ability to deposit funds and transact with a MasterCard, Visa, American Express or Discover branded prepaid card is nothing short of a miracle.

A consistent theme among the prepaid card customer base is credit.  In the US, there are millions of immigrants, recently divorced or widowed, recent college grads and “cash-based, working poor” who have a thin or no credit file with the leading credit bureaus.

In nearly every prepaid card survey that we have ever conducted, we’ve heard “how do I get credit” and “how can I improve the low credit score that I currently have?”   I mention this as network branded reloadable prepaid cards have always seemed to be the obvious introductory product for those seeking credit. 

The idea of a “road to credit” strategy whereby the prepaid card customer who exhibits responsible spending and savings behaviors which are reported to and monitored by the credit bureaus, are then rewarded with a line of credit has always seemed highly plausible and desirable. 

Philip J. Philliou is the CEO of TruBeacon.